Publication: Productivity Growth and Efficiency Dynamics of Korean Structural Transformation
Loading...
Published
2020-06
ISSN
Date
2020-06-25
Author(s)
Editor(s)
Abstract
This paper documents the sources of the Republic of Korea's economic growth, as well as the associated productivity growth and efficiency dynamics during its process of structural transformation from 1970 to 2016. The analysis includes land as a separate production factor to sort out the significant effect of changes in intersectoral land allocation, which makes significant differences in measuring the magnitudes and directions of change in sectoral total factor productivity (TFP). Input-based growth and structural changes contributed to the early take-off stage of growth in the 1970s. However, in the following three decades, the source of growth switched to productivity improvements, mainly engineered by the industry sector. This was the reason behind the country's sustained growth and escape from the "middle-income trap." Furthermore, agricultural TFP growth also made an important contribution to structural transformation by pushing out factors from agriculture to industry. Since 2011, however, when the Korean economy seemed to reach a steady state of constant capital-output ratio, TFP has suddenly stagnated. The wedge analysis suggests that the intersectoral allocation of labor was biased toward agriculture while that of capital and land was biased toward industry, compared to efficient levels. Meanwhile, the inter-temporal wedge analysis suggests that the Korean economy was in an over-investment mode throughout its structural transformation. The analysis also shows that the periods of productivity growth are not always associated with the enhancement of allocative efficiency, while growth-disturbing external macroeconomic shocks, such as joining the WTO and the Asian financial crisis, led to improvements in allocative efficiency.
Link to Data Set
Citation
“Jeong, Hyeok. 2020. Productivity Growth and Efficiency Dynamics of Korean Structural Transformation. Policy Research Working Paper;No. 9285. © World Bank. http://hdl.handle.net/10986/33980 License: CC BY 3.0 IGO.”
Digital Object Identifier
Associated URLs
Associated content
Other publications in this report series
Publication The Economic Value of Weather Forecasts: A Quantitative Systematic Literature Review(Washington, DC: World Bank, 2025-09-10)This study systematically reviews the literature that quantifies the economic benefits of weather observations and forecasts in four weather-dependent economic sectors: agriculture, energy, transport, and disaster-risk management. The review covers 175 peer-reviewed journal articles and 15 policy reports. Findings show that the literature is concentrated in high-income countries and most studies use theoretical models, followed by observational and then experimental research designs. Forecast horizons studied, meteorological variables and services, and monetization techniques vary markedly by sector. Estimated benefits even within specific subsectors span several orders of magnitude and broad uncertainty ranges. An econometric meta-analysis suggests that theoretical studies and studies in richer countries tend to report significantly larger values. Barriers that hinder value realization are identified on both the provider and user sides, with inadequate relevance, weak dissemination, and limited ability to act recurring across sectors. Policy reports rely heavily on back-of-the-envelope or recursive benefit-transfer estimates, rather than on the methods and results of the peer-reviewed literature, revealing a science-to-policy gap. These findings suggest substantial socioeconomic potential of hydrometeorological services around the world, but also knowledge gaps that require more valuation studies focusing on low- and middle-income countries, addressing provider- and user-side barriers and employing rigorous empirical valuation methods to complement and validate theoretical models.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Rigging the Scores: Corruption through Scoring Rule Manipulation in Public Procurement Auctions(Washington, DC: World Bank, 2025-12-02)Public procurement is highly susceptible to corruption, especially in developing countries. Although open auctions are widely adopted to curb it, this paper finds that corruption remains prevalent even within this procurement format. Procurement officers can collaborate with firms to manipulate scoring rules, ensuring predetermined winners, while corrupt firms submit noncompetitive bids to meet minimum bidder requirements. Using extensive data from Chinese public procurement auctions, the paper introduces model-driven statistical tools to detect such corruption, identifying a corruption rate of 65 percent. A procurement expert audit survey confirms the tools’ reliability, with a 91 percent probability that experts recognize suspicious scoring rules when flagged. Firm-level analysis reveals that local, state-owned, and less productive firms are favored in corrupt auctions. Lastly, the paper explores policy implications. Analysis of the national anti-corruption campaign since 2012 suggests that general investigations may be insufficient to address deeply ingrained corrupt practices. Using counterfactuals based on an estimated structural model, the paper shows that implementing anonymous call-for-tender evaluations could improve social welfare by 10 percent by eliminating suspicious rules and encouraging broader participation.Publication Labor Demand in the Age of Generative AI: Early Evidence from the U.S. Job Posting Data(Washington, DC: World Bank, 2025-11-18)This paper examines the causal impact of generative artificial intelligence on U.S. labor demand using online job posting data. Exploiting ChatGPT’s release in November 2022 as an exogenous shock, the paper applies difference-in-differences and event study designs to estimate the job displacement effects of generative artificial intelligence. The identification strategy compares labor demand for occupations with high versus low artificial intelligence substitution vulnerability following ChatGPT’s launch, conditioning on similar generative artificial intelligence exposure levels to isolate substitution effects from complementary uses. The analysis uses 285 million job postings collected by Lightcast from the first quarter of 2018 to the second quarter of 2025Q2. The findings show that the number of postings for occupations with above-median artificial intelligence substitution scores fell by an average of 12 percent relative to those with below-median scores. The effect increased from 6 percent in the first year after the launch to 18 percent by the third year. Losses were particularly acute for entry-level positions that require neither advanced degrees (18 percent) nor extensive experience (20 percent), as well as those in administrative support (40 percent) and professional services (30 percent). Although generative artificial intelligence generates new occupations and enhances productivity, which may increase labor demand, early evidence suggests that some occupations may be less likely to be complemented by generative artificial intelligence than others.Publication Investment Policy Reforms and Foreign Direct Investment Inflows(Washington, DC: World Bank, 2025-12-01)Foreign direct investment has the potential to introduce much-needed capital and expertise in emerging and developing economies. To attract foreign direct investment, many countries have eased restrictions on foreign ownership in various sectors, reformed their institutions, and set up investment promotion agencies. Until the mid-2010s, Ethiopia remained one of the few countries that resisted this trend, with several stringent restrictions in place on foreign direct investment entry and operations in the country. This study employs a synthetic control method to examine patterns in foreign capital inflows following a series of investment policy reforms that were substantively introduced in the mid-2010s (circa 2015). The study offers evidence that investment policy reforms contributed to a significant foreign direct investment inflow in Ethiopia, compared to what would have occurred in the absence of these policies. An alternative strategy that conservatively specifies the donor country pool using an AI-assisted deep search technique changes the donor pool weighting matrix of the synthetic control method, but the estimated policy effects largely remain robust to this specification. The findings highlight the importance of targeted reforms in promoting foreign direct investment inflow in developing countries.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Moving off the Farm : Land Institutions to Facilitate Structural Transformation and Agricultural Productivity Growth in China(2012-01-01)Agriculture has made major contributions to China's economic growth and poverty reduction, but the literature has rarely focused on the institutional factors that might underpin such structural transformation and productivity. This paper aims to fill that gap. Drawing on an 8-year panel of 1,200 households in six key provinces, it explores the impact of government land reallocations and formal land-use certificates on agricultural productivity growth, as well as the likelihood of households to exit from agriculture or send family members to the non-farm sector. It finds that land tenure insecurity, measured by the history of past land reallocations, discourages households from quitting agriculture. The recognition of land rights through formal certificates encourages the temporary migration of rural labor. Both factors have a large impact on productivity (at about 30 percent each), mainly by encouraging market-based land transfers. A sustained increase in non-agricultural opportunities will likely reinforce the importance of secure land tenure, which is a precondition for successful structural transformation and continued economic attractiveness of rural areas.Publication Endowment Structures, Industrial Dynamics, and Economic Growth(2009-09-01)This paper develops a dynamic general equilibrium model to explore industrial evolution and economic growth in a closed developing economy. The authors show that industries will endogenously upgrade toward the more capital-intensive ones as the capital endowment becomes more abundant. The model features a continuous inverse-V-shaped pattern of industrial evolution driven by capital accumulation: As the capital endowment reaches a certain threshold, a new industry appears, prospers, then declines and finally disappears. While the industry is declining, a more capital-intensive industry appears and booms, ad infinitum. Explicit solutions are obtained to fully characterize the whole dynamics of perpetual structural change and economic growth. Implications for industrial policies are discussed.Publication Uganda - Promoting Inclusive Growth : Transforming Farms, Human Capital, and Economic Geography, Synthesis Report(Washington, DC, 2012-02)At an average above 6.0 percent per year over the past two decades, Uganda' s growth rate was impressive by all standards. In parallel, poverty declined significantly, not only in urban areas, but also to some extent within the rural areas. This combination was possible because the key drivers of growth were labor-intensive services sectors, some of which are agriculture based. In fact, Uganda's growth process has reduced overall poverty faster than what has been observed in many other developing countries. This report addresses the issue from a double perspective: sectoral and geographical. From a sectoral perspective, it concludes that the agricultural sector needs transformation because it remains the primary employer; it is the country's main comparative advantage and bedrock for industrialization. More broadly, identifying sectors with potential will be important for employment opportunities, which in turn will be largely dependent on productivity levels and thus on the level of education and skills of the labor force. From a geographical perspective, transformation generally yields a concentration of economic activities that leaves some locations lagging in prosperity. This unbalanced growth needs to be supported with appropriate economic integration policies that have been analyzed in the report.Publication Estimating Parameters and Structural Change in CGE Models Using a Bayesian Cross-Entropy Estimation Approach(World Bank Group, Washington, DC, 2015-01)This paper uses a three-step Bayesian cross-entropy estimation approach in an environment of noisy and scarce data to estimate behavioral parameters for a computable general equilibrium model. The estimation also measures how labor-augmenting productivity and other structural parameters in the model may have shifted over time to contribute to the generation of historically observed changes in the economic arrangement. In this approach, the parameters in a computable general equilibrium model are treated as fixed but unobserved, represented as prior mean values with prior error mass functions. Estimation of the parameters involves using an information-theoretic Bayesian approach to exploit additional information in the form of new data from a series of social accounting matrices, which are assumed were measured with error. The estimation procedure is "efficient" in the sense that it uses all available information and makes no assumptions about unavailable information. As illustration, the methodology is applied to estimate the parameters of a computable general equilibrium model using alternative data sets for the Republic of Korea and Sub-Saharan Africa.Publication Climate Change and Agriculture in South Asia(World Bank, Washington, DC, 2012)There is increasing evidence suggesting that climate change will negatively impact agricultural production in South Asia. Decreased domestic production may make South Asian countries more dependent on imports. The extent to which South Asia will need to increase its imports as a result of climate change will presumably depend on the degree to which the latter will affect domestic output. The effects of climate change on agriculture may well differ substantially for individual South Asian countries and indeed for regions within a given country which can be approximated by food production units. This calls for an analysis of climate change effects on trade flows under alternative trade policy regimes both for agriculture and non-agricultural sectors. The specific objectives of the paper include the following: analyze the extent to which agricultural production in South Asia and elsewhere in the world may be affected by different scenarios regarding climate change; analyze the extent to which changes in domestic production in South Asia resulting from climate change will lead to increased demand for imports by South Asian countries; analyze the effects of increased import demand in South Asia and changing exportable surpluses elsewhere on world market prices of major agricultural commodities consumed in South Asia; to the extent that South Asian governments allow transmission of changes in world market prices to domestic prices, analyze the potential welfare effects of changes in the latter; analyze if, and to what extent, worldwide trade liberalization and implementation of South Asian Free Trade Area (SAFTA) will dampen the effects of climate change on domestic agricultural prices in South Asia. In this context, the report is organized as follows: chapter one gives introduction. Chapter two describes the methodology used - with particular attention to how different models and modeling techniques are linked to produce an as accurate as possible assessment based on state-of-the-art knowledge. Chapter three provides an up-to-date analysis of trade flows and policies, and production patterns for key food products in South Asia to explain the context in which climate change is taking place. Chapter four describes the climate change scenarios and illustrates their consequences for crop yields at a global level and for South Asia - and in particular shows the vulnerability of the region to these changes. Baseline design, simulations, and results are discussed in chapter five. The final chapter six provides a short summary, discusses the limitations of the analysis, and derives suggestions and guidelines for future research.
Users also downloaded
Showing related downloaded files
Publication Global Economic Prospects, January 2025(Washington, DC: World Bank, 2025-01-16)Global growth is expected to hold steady at 2.7 percent in 2025-26. However, the global economy appears to be settling at a low growth rate that will be insufficient to foster sustained economic development—with the possibility of further headwinds from heightened policy uncertainty and adverse trade policy shifts, geopolitical tensions, persistent inflation, and climate-related natural disasters. Against this backdrop, emerging market and developing economies are set to enter the second quarter of the twenty-first century with per capita incomes on a trajectory that implies substantially slower catch-up toward advanced-economy living standards than they previously experienced. Without course corrections, most low-income countries are unlikely to graduate to middle-income status by the middle of the century. Policy action at both global and national levels is needed to foster a more favorable external environment, enhance macroeconomic stability, reduce structural constraints, address the effects of climate change, and thus accelerate long-term growth and development.Publication The Container Port Performance Index 2023(Washington, DC: World Bank, 2024-07-18)The Container Port Performance Index (CPPI) measures the time container ships spend in port, making it an important point of reference for stakeholders in the global economy. These stakeholders include port authorities and operators, national governments, supranational organizations, development agencies, and other public and private players in trade and logistics. The index highlights where vessel time in container ports could be improved. Streamlining these processes would benefit all parties involved, including shipping lines, national governments, and consumers. This fourth edition of the CPPI relies on data from 405 container ports with at least 24 container ship port calls in the calendar year 2023. As in earlier editions of the CPPI, the ranking employs two different methodological approaches: an administrative (technical) approach and a statistical approach (using matrix factorization). Combining these two approaches ensures that the overall ranking of container ports reflects actual port performance as closely as possible while also being statistically robust. The CPPI methodology assesses the sequential steps of a container ship port call. ‘Total port hours’ refers to the total time elapsed from the moment a ship arrives at the port until the vessel leaves the berth after completing its cargo operations. The CPPI uses time as an indicator because time is very important to shipping lines, ports, and the entire logistics chain. However, time, as captured by the CPPI, is not the only way to measure port efficiency, so it does not tell the entire story of a port’s performance. Factors that can influence the time vessels spend in ports can be location-specific and under the port’s control (endogenous) or external and beyond the control of the port (exogenous). The CPPI measures time spent in container ports, strictly based on quantitative data only, which do not reveal the underlying factors or root causes of extended port times. A detailed port-specific diagnostic would be required to assess the contribution of underlying factors to the time a vessel spends in port. A very low ranking or a significant change in ranking may warrant special attention, for which the World Bank generally recommends a detailed diagnostic.Publication Business Ready 2024(Washington, DC: World Bank, 2024-10-03)Business Ready (B-READY) is a new World Bank Group corporate flagship report that evaluates the business and investment climate worldwide. It replaces and improves upon the Doing Business project. B-READY provides a comprehensive data set and description of the factors that strengthen the private sector, not only by advancing the interests of individual firms but also by elevating the interests of workers, consumers, potential new enterprises, and the natural environment. This 2024 report introduces a new analytical framework that benchmarks economies based on three pillars: Regulatory Framework, Public Services, and Operational Efficiency. The analysis centers on 10 topics essential for private sector development that correspond to various stages of the life cycle of a firm. The report also offers insights into three cross-cutting themes that are relevant for modern economies: digital adoption, environmental sustainability, and gender. B-READY draws on a robust data collection process that includes specially tailored expert questionnaires and firm-level surveys. The 2024 report, which covers 50 economies, serves as the first in a series that will expand in geographical coverage and refine its methodology over time, supporting reform advocacy, policy guidance, and further analysis and research.Publication Global Economic Prospects, June 2025(Washington, DC: World Bank, 2025-06-10)The global economy is facing another substantial headwind, emanating largely from an increase in trade tensions and heightened global policy uncertainty. For emerging market and developing economies (EMDEs), the ability to boost job creation and reduce extreme poverty has declined. Key downside risks include a further escalation of trade barriers and continued policy uncertainty. These challenges are exacerbated by subdued foreign direct investment into EMDEs. Global cooperation is needed to restore a more stable international trade environment and scale up support for vulnerable countries grappling with conflict, debt burdens, and climate change. Domestic policy action is also critical to contain inflation risks and strengthen fiscal resilience. To accelerate job creation and long-term growth, structural reforms must focus on raising institutional quality, attracting private investment, and strengthening human capital and labor markets. Countries in fragile and conflict situations face daunting development challenges that will require tailored domestic policy reforms and well-coordinated multilateral support.Publication Digital Progress and Trends Report 2023(Washington, DC: World Bank, 2024-03-05)Digitalization is the transformational opportunity of our time. The digital sector has become a powerhouse of innovation, economic growth, and job creation. Value added in the IT services sector grew at 8 percent annually during 2000–22, nearly twice as fast as the global economy. Employment growth in IT services reached 7 percent annually, six times higher than total employment growth. The diffusion and adoption of digital technologies are just as critical as their invention. Digital uptake has accelerated since the COVID-19 pandemic, with 1.5 billion new internet users added from 2018 to 2022. The share of firms investing in digital solutions around the world has more than doubled from 2020 to 2022. Low-income countries, vulnerable populations, and small firms, however, have been falling behind, while transformative digital innovations such as artificial intelligence (AI) have been accelerating in higher-income countries. Although more than 90 percent of the population in high-income countries was online in 2022, only one in four people in low-income countries used the internet, and the speed of their connection was typically only a small fraction of that in wealthier countries. As businesses in technologically advanced countries integrate generative AI into their products and services, less than half of the businesses in many low- and middle-income countries have an internet connection. The growing digital divide is exacerbating the poverty and productivity gaps between richer and poorer economies. The Digital Progress and Trends Report series will track global digitalization progress and highlight policy trends, debates, and implications for low- and middle-income countries. The series adds to the global efforts to study the progress and trends of digitalization in two main ways: · By compiling, curating, and analyzing data from diverse sources to present a comprehensive picture of digitalization in low- and middle-income countries, including in-depth analyses on understudied topics. · By developing insights on policy opportunities, challenges, and debates and reflecting the perspectives of various stakeholders and the World Bank’s operational experiences. This report, the first in the series, aims to inform evidence-based policy making and motivate action among internal and external audiences and stakeholders. The report will bring global attention to high-performing countries that have valuable experience to share as well as to areas where efforts will need to be redoubled.