The Baumol Diseases and the Korean Economy

Wankeun Oh and Kyungsoo Kim

Emerging Markets Finance and Trade, 2015, vol. 51, issue S1, S214-S223

Abstract: This article examines the Baumol effect and the consequences of unbalanced growth across Korean industries. The results demonstrate that the Baumol effect exists, but it is qualitatively different from existing literature. Although Baumol’s cost disease is significant, it is weak. Certain attributes of the Korean economy such as heavy reliance on exports and compressed growth seem to be responsible. Weak cost disease leads to a weak growth disease: the aggregate productivity growth does not monotonically decline over time. Productivity growth has led to the deindustrialization of employment. The value holds effective after controlling the growth of international trade.

Date: 2015
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DOI: 10.1080/1540496X.2014.998889

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