The Effect of Restructuring on Labor Reallocation and Productivity Growth: An Estimation for Korea

Hyelin Choi (), Sung Chun Jung () and Su Bin Kim ()
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Hyelin Choi: Korea Institute for International Economic Policy
Sung Chun Jung: Korea Institute for International Economic Policy
Su Bin Kim: Korea Institute for International Economic Policy

No 17-4, Working Papers from Korea Institute for International Economic Policy

Abstract: Productivity is considered one of the most important factors for economic growth. Total productivity grows through technological progress or reallocation of resources. This paper analyses their contribution to economic growth for total economy and by sectors. The main finding is that economy-wide increases but this is mainly due to internal technological improvements. On the one hand, inter-sector reallocation of labor negatively contributes to economic growth as employment moves to service sectors with low productivity. Further, when looking at the sectoral-level productivity growth, both internal and external restructuring make positive contributions to aggregate economic growth. However, internal technological progress and reallocation of employment appear to similarly contribute to the sectoral-level economic growth in the manufacturing sector, whereas internal restructuring makes a larger contribution to economic growth in the service sector. This suggests that there is more room for reallocation of resources to contribute to the productivity growth in service sectors. Therefore, the productivity growth of the service sector would foster economy-wide productivity and it can be achieved by the mitigation of misallocation of resources in service sectors.

Keywords: Productivity; Employment; Labor reallocation (search for similar items in EconPapers)
JEL-codes: E01 E20 E22 E23 E24 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2017-09-15
New Economics Papers: this item is included in nep-eff, nep-mac and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:ris:kiepwp:2017_004

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