Technological Progress , Structural Change and Productivity Growth in Manufacturing Sector of South Korea

This paper focuses on the impact of technology and structural change on the aggregate productivity growth in the manufacturing sector of South Korea, using the eight firm size classes over the period 1970–2000. The conventional shift-share analysis is used to measure the impact of shift of both labour and capital inputs. The results show that structural change on an average was conducive to productivity growth during the 1970s and this pattern reversed afterwards. Small and medium industries were more dynamic in terms of reallocation of resources; however, the dominance of large-sized firms in the manufacturing sector outweighed the positive impact of that reallocation. Deliberate state policy favouring large-sized firms has impeded the restructuring process facilitated by technical progress, the penalty for which has been paid in terms of forgone growth.