KDI Journal of Economic Policy

Korea Development Institute (한국개발연구원)
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Aggregate Productivity Growth in Korean Manufacturing: The Role of Young Plants

  • Received : 2017.06.09
  • Published : 2017.11.30
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Abstract

I measure aggregate productivity growth in manufacturing between 1995 and 2013 as defined by Petrin and Levinsohn (2012). I decompose aggregate productivity growth into technical efficiency improvements, resource reallocations, and net entry effects. I find that aggregate productivity growth slows down after 2004 and that the rapid drop in technical efficiency growth contributed most to the decline. In this paper, I focus on the role of young plants with regard to productivity growth of Korean manufacturing. I show that young plants account for nearly half of APG (48%), while their value-added share is 14 percent on average between 1995 and 2013. I find that productivity growth at young plants has been declining for the last ten years. The lower growth of continuing young plants contributes to this trend. These results stress the important role of young plants in aggregate productivity growth and imply that understanding the dynamics of young plants is necessary to form effective start-up policies.

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