Inter-industrial Productivity Spillovers in Korean Manufacturing (Vol.3, No.2)
:Economist, Economic Studies Office(the Bank of Korea), The auther is grateful to Dr. Jong-Kyu Lee, and three anonymous referees, and to participants in a seminar held at the Economic Studies Office for their helpful comments and suggestions.
This paper posits that sustained productivity growth entails division of labor to evolve and that this can be detected by checking whether inter-industrial productivity spillovers are in operation. It attempts to measure the parameters of a productivity growth model, which is a transformed growth regression model. The parameters of the model consist of economies of scale, suppliers-driven spillovers, and customer-driven spillovers.
The estimation results from analysis of panal data with twenty-two Korean manufacturing industries from 1971 to 1996 show that inter-industrial spillovers, especially supplier-driven spillovers, were meager, while economies of scale were witnessed only in the short run, not in the long run. These findings are interpreted as reflecting the underdevelopment of the materials and parts industry, but more importantly the shallow division of labor in Korean manufacturing.
Estimation results with the sample divided into three periods, 1971～1979, 1980～1988, and 1989～1996, showed few improvements in the later periods in terms of supplier-driven spillovers; rather they indicated a deterioration in the economies of scale parameter over the time periods, until diseconomies of scale prevailed in the last period. Beside this, a comparison of the parameter estimates with those for the U.S.A. confirmed that the division of labor in the Korean manufacturing sector had not evolved to the degree typical of an advanced economy.
The shallow division of labor in Korean manufacturing, in turn, is conjectured to have stemmed not only from the short history of industrial development and the consequent lack of experience in creating new knowledge, but also from the lack of properly working networks, especially a national innovation system promoting competition and cooperation among industries for innovation.
Key words: productivity, spillovers, economies of scale