Productivity and Employment in a Developing Country: Evidence from Republic of Korea

Sangho Kim (shkim@honam.ac.kr), Hyunjoon Lim and Donghyun Park
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Sangho Kim: Honam University
Hyunjoon Lim: University of Rochester

No 116, ADB Economics Working Paper Series from Asian Development Bank

Abstract: The paper empirically investigates the relationship between productivity and employment in Republic of Korea using structural vector autoregression (VAR) models. Productivity-enhancing technology shocks significantly increase hours worked, which lends support to the real business cycle theory. The results show that technology shocks can explain most elements of a business cycle both in the short and long run. On the other hand, demand shocks can only explain price fluctuations. The evidence thus suggests that Korean policy makers should give higher priority to supply-side policies that promote technological progress and innovation.

Keywords: employment; Republic of Korea; productivity; structural vector autoregression; technology shocks (search for similar items in EconPapers)
JEL-codes: E24 J21 O33 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2008-06-01
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Persistent link: https://EconPapers.repec.org/RePEc:ris:adbewp:0116

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