Patterns of productivity growth in South Korean manufacturing industries, 1963–1979

Abstract

In this paper we estimate sources of labor productivity growth in 25 Korean manufacturing industries between 1963 and 1979. We find that less than half of the 11 percent annual increase in overall manufacturing labor productivity can be attributed to capital deepening, and that the importance of this factor and total factor productivity advance varied sharply across industries. Heavy industries accumulated capital per worker at a faster pace, and realized total factor productivity growth at a much slower rate, than others did. This contrast may be related to the extensive capital subsidies provided to the former as part of an import-substitution program. Also, the rapid total factor productivity growth in labor-intensive manufacturing industries was accompanied by rapid growth in average firm size, supporting the argument that the shift from craft to modern production techniques has been a major source of productivity growth.