Economic Growth and Productivity Performance: A Comparison of Taiwan and South Korea based on KLEMS Approach
Date Issued
2014
Date
2014
Author(s)
Chen, Po-Chun
Abstract
With long-term endeavors, Taiwan and South Korea have transformed from outmoded agricultural countries into emerging technology industrialized countries. Their development experience was hailed as “Taiwan Miracle” and “Miracle on the Han River”. Over the course of the past several decades, these two countries have similar conditions on economic development, which are not totally the same in some ways. Their exchanges have increased in frequency, but the competition is also fierce. In the past decade, South Korea has succeeded in branding consumer electronics; therefore, the GDP per capita in South Korea overtook Taiwan for the first time in 2005.
To compare the sources of output and productivity growth of Taiwan and South Korea at industry level from 1981 to 2010, we not only use the South Korea KLEMS data from Asia database but also construct the Taiwan KLEMS data. Following the growth accounting methodology developed by Jorgenson, Gollop and Fraumeni (1987), we decompose the output growth into contributions of capital, labor, energy, material and service inputs as well as total factor productivity. We can use KLEMS data of 30 industries to conduct cross-period, cross-industry and cross-country comparisons on the structures of industry output growth and of the factor contribution. We further discuss the impact of policy changes on its industrial structure and economic performance.
The empirical results show that in Taiwan, the performance of manufacturing industries is inferior to service industries. Because a large number of businessmen in Taiwan have been investing in China since 1987, the share of value added in Taiwanese manufacturing industries is decreasing. And Taiwanese service industries share is relatively increasing. In contrast, manufacturing industries and service industries share show an upward trend in South Korea because of the high rates of growth in Korean manufacturing industries. But both Taiwanese and Korean primary industries experience a recession. In addition, structural changes have been taking place in the manufacturing industries of Taiwan and Korea since the 1980s. The traditional manufacturing industries are in the midst of downturn, while technology-intensive industries are booming. The main manufacturing industry of the two countries has gradually transformed from the textiles, textile products, leather products and footwear industry into the electrical and optical equipment industry.
With respect to the sources of output growth at industry level, we find that most of the Korean manufacturing industries have higher real growth rate of factor inputs than that in Taiwan; therefore, the output growth rate of Korean manufacturing industries is generally higher than that of Taiwan’s manufacturing industries. But there is not much difference in the productivity of the manufacturing industries between the two countries. We also find that the contribution share from materials input outweighs those from other inputs for most industries in manufacturing sector. In other words, the stable supply of raw materials is the key point to the development of manufacturing industries. In regard to service industries, there is not much difference in the output growth of the service industries between the two countries. However, regarding productivity in service industries in Korea, the growth is negative; on the other hand, Taiwanese service industries have high productivity growth, and the productivity plays important role in the output growth for most industries in service sector. Especially in the wholesale and retail trade industry, the productivity of each period in Taiwan is better than that in South Korea. Therefore, Taiwanese government may encourage the future development of the industry.
Subjects
KLEMS
產業結構
經濟成長來源
生產力
總要素生產力
SDGs
Type
thesis
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