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A Study on the Growth Characteristic of Korean Manufacturing Industry through the Growth Model of Solow: focusing on the period between 1994 and 2018

  • Journal of Regional Studies and Development
  • Abbr : JRSD
  • 2021, 30(1), pp.189-215
  • DOI : 10.22739/ipaid.2021.30.1.189
  • Publisher : Institute for Poverty Alleviation and International Development: IPAID
  • Research Area : Social Science > Area Studies > Regional Studies in general > Comparative / Statistical Regional Studies
  • Received : March 8, 2021
  • Accepted : April 5, 2021
  • Published : April 30, 2021

Myung-Joong Kwon 1,  Cho Sang Hyuk 1

1연세대학교

Accredited

ABSTRACT

This paper analyzes which factors among capital accumulation or technological progress led the economic growth by using 1,326,071 companies in the Korean manufacturing industry during the 25-year period from 1994 to 2018. The results of the research conducted by the growth accounting analysis method are as follows: First, the growth of Korean manufacturing industry was led by innovation (i.e. increasing total factor productivity) from the mid-1990s to 2011. Second, total factor productivity growth rate fell to negative from 2012 to 2018. In other words, innovation stops. This phenomenon is attributed to a decrease in technology innovation investment due to shrinking demand for manufacturing products after the 2008 global financial crisis. As a result, growth during this period was driven by comprehensive capital investments that included human capital. Third, it is confirmed by Young(1994, 1995) that the 1994-2011 period is innovation-driven growth, and the 2012-2018 period is input-driven growth. Fourth, although the firm size does not affect the technology progress rate and production growth rate, it affects, to some degree, the capital growth rate. We propose a subsidy policy that will induce technology diffusion for tackling current growth stagnation.

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This paper was written with support from the National Research Foundation of Korea.
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