Is Korea Catching Up? An Analysis of the Labour Productivity Growth in South Korea

Abstract

Comparing the Korean labour productivity growth in the last two decades with the Japanese and US labour productivity growth, data confirm a process of catching up in several important manufacturing sectors. The paper investigates its determinants using a non-neoclassical model. Investments in skills and capabilities are found to be crucial in explaining this trend. Important policy implications for developing countries are then discussed. In the long run, a targeted education policy with government intervention and a strong emphasis on technical education can give high pay-offs. This conclusion holds in particular when the aim of the country is to compete in the international markets, not along the low road to competitiveness, based on squeezing wages and profit margins, but along the high road (i.e. improving productivity, wages and profits).

Notes

¹ For instance, with regard to Latin America this argument is addressed in Katz (2000).

² In the rest of the paper, we use the terms South Korea and Korea interchangeably.

³ The classification adopted is Isic Rev.3.

⁴ The gap is computed by dividing labour productivity in South Korea by labour productivity in the USA and in Japan.

⁵ In Figure 7 we present the profit share, which is the reciprocal of the wage share (wageshare^− 1).

⁶ Won is the currency of South Korea.

⁷ We are grateful to an anonymous referee for raising this point.

Additional information

Notes on contributors

Giulio Guarini

Giulio Guarini, Università di Roma-La Sapienza, Italy.

Vasco Molini

The authors wish to thank, for their comments and suggestions, Manuel Albaladejo, Mario Biggeri, Sanjaya Lall, Alessandro Roncaglia, Mans Sodeborn, Anna Stenbeck and an anonymous referee. Francesca Baccani patiently revised our paper. Usual disclaimers apply.

Roberta Rabellotti

Roberta Rabellotti, Department of Economics and Quantitative Methods, Università del Piemonte Orientale, Italy.