• Journal of the Korea Academia-Industrial cooperation Society
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• v.8 no.1
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• pp.143-150
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• 2007

Using a panel data of Korea for $1979{\sim}2002$, this study investigates the determinants of the service sector employment share in Korea. In order to analyze the impact of macroeconomic factors on the service sector's employment share we estimate a simple panel model which is in line with Baumol's model. The panel GMM estimation results show that: 1) The increase in the share of service-related jobs in total employment tends to rise with GDP per capita, which confirms demand-bias hypothesis proposed by Clark. 2) We find that a crucial role in this process has been played by the productivity gap. As Baumol's hypothesis or Baumolis disease, the expansion of the employment share in services relative to industry is the direct consequence of services' lower productivity performances.

• International Area Studies Review
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• v.16 no.3
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• pp.119-134
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• 2012

This paper examines the shift to service economy in the developed countries including Korea and analyzes whether Baumol's cost disease hypothesis could explain the labor productivity growth in the developed countries even though the share of service industry is rising rapidly. We have found the following results: First, the shift to service economy is widely observed in the developed countries. Second, the productivity gap between manufacturing and service industry is widening as a result of stagnant productivity growth in service industry. Third, however, the productivity in the whole economy is still growing because of the large productivity differences among the sub-industries in service industry. Fourth, we have found that the productivities of some service industries, such as finance, communication, business service, etc., are almost same or larger than the productivity of manufacturing industry. From this fact it is likely that the productivity of the whole economy could grow in spite of the stagnant productivity growth in service industry.

• International Commerce and Information Review
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• v.14 no.2
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• pp.271-293
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• 2012

As service industry became more important, many of studies have been done on the role of service. Such studies has been researched focusing on the relationship between the service intensity in the economy and a country's productivity. Baumal(1967) suggested that service growth in economy would bring about decrease in productivity. However, the economy of developed countries encounter with the productivity growth as their economy grows, which phenomenon called Baumol's paradox. Oulton (1999, 2001) find out the reason of Baumol's paradox in a forward and backward chain effects. So, this paper is aimed at verifying the theory of Oulton (1999, 2001) for 13 OECD countries using panel data analysis. We find out that the intermediate knowledge-intensive service inputs cause a multifactor productivity growth.

• International Area Studies Review
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• v.15 no.2
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• pp.125-150
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• 2011

As the economy grows, there is a concern that the economic development causes a productivity reduction because of the service intensive growth. However, the economy of developed countries encounter with the productivity growth as their economy grows, which phenomenon called Baumol's paradox. Oulton (1999, 2001) find out the reason of Baumol's paradox in a forward and backward chain effects. So, this paper is aimed at verifying the theory of Oulton (1999, 2001). Moreover, we test the difference effect between a consumer service and producer service input using a dummy variable. We use the Input-Output Table (1990, 1995, 2000, 2005) that is offered by the Bank of Korea to accomplish the purpose of our research that is represented above. We find out that the Korea's intermediate producer service inputs cause a multifactor productivity growth. That result is matched with the Oulton (1999, 2001)'s theory. But, the intermediate consumer service inputs don't have a significant effect on a multifactor productivity. The result of verifying the effect of intermediate producer service inputs among industries shows that the effects on manufacture industries are less than other industries.

• Economic Analysis
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• v.26 no.4
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• pp.1-38
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• 2020

In this research, we explore the effects of changes in industrial structure due to industrial restructuring on employment and growth in the Korean economy. To that end, we first investigate the impact of industrial restructuring on employment through Lilien's sectoral shift hypothesis, considering the dependence of industrial restructuring on business cycles. As a result of the analysis, we find that changes in the industrial structure have exerted a short-term effect of increasing unemployment, and that the effects of industrial restructuring are even greater during the economic downturn period. In light of these points, Lilien's sectoral shift hypothesis seems to be valid in Korea. Next, we examine the effect of industrial restructuring on economic growth in Korea by analyzing which one, between the Kuznetz hypothesis and the Baumol effect, is dominant. Empirical results reveal that the mid- to long-term effect of industrial restructuring on GDP growth is significant, which is in accordance with the Kuznets hypothesis, where resource allocation along with industrial restructuring to sectors with high productivity spurs economic growth.

• Journal of Technology Innovation
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• v.13 no.1
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• pp.213-246
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• 2005

Despite of the impressive progress made in the Evolutionary techno-economics during the last two decades, there have been very little, if not at all, theoretical advancement in explaining an endogenous mechanism of transforming a technological paradigm within self-perpetuatingstructural dynamics. The question poorly attempted was raised by Schumpeter a century ago in his effort to overcome the well-known 'Walras' trap'. Although there have been increasing number of researchers recently tackling the issue quite seriously from within the Evolutionary school, I see it that radical reconstruction of the basic principle of Evolutionary research framework is urgently needed to solve the century long fundamental question, from evolutionary approach to transformational approach. In the paper, I will show the theoretical feasibility of explaining an endogenous mechanism of paradigm transformation, relying upon the concept of localized dynamics and the concept of morphogenetic structuration. It should be emphasized that there must be aendogenous process of deepening structural Instability generated in the process of economic coordination to secure efficient circular flow. The concept of development bottleneck initiated by the Baumol's cost disease could be regarded as one of the important source of such mechanism. Unfortunately, however, it is a brief conceptual description presented in the paper rather than a comprehensive analytical model, due to the space limitation imposed.

• KDI Journal of Economic Policy
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• v.13 no.1
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• pp.167-197
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• 1991

This paper is intended as an introductory essay to explain endogenous changes in the scope of firm activities in the competitive structure of a deregulated, multi-product financial industry. Recently, the global financial industry has been experiencing a widespread reshuffling in its activities, reflecting both consolidation and specialization. The spread of the universal banking system, which involves the integration of various kinds of financial activities, has resulted in the so-called financial supermarket. At the same time, the traditional set of banking activities has been unbundled into so-called financial boutiques. A relevant question is where the current reshuffling process of integration and disintegration in financial activities might lead the financial industry. However, presently popular theories of the financial industry are not really appropriate for the analysis of this issue. This paper attempts to integrate the theory of specialization [George J. Stigler, "The Division of Labor is Limited by the Extent of the Market," Journal of Political Economy, Vol. LIX, No.3, June 1951] and the theory of the multi-product firm [William J. Baumol, John C. Panzar, and Robert D. Willig, Contestable Markets and the Theory of Industry Structure, Harcourt Brace Jovanovich, Inc., New York, 1982] and to apply the resulting hybrid theory, a theory on the scope of financial activity, to the financial industry. The implications of this theory for the issues raised above are formalized under five hypotheses on the reshuffling of financial activities as listed below: Hypothesis I: The differences in the organization of financial industries among countries are determined by differences in the size of the financial markets, other things being equal. Hypothesis II: A financial firm will separate those financial activities simultaneously having relatively strong economies of scale and relatively weak economies of scope (alternatively, diseconomies of scope) from other activities. Conversely, the firm will integrate those activities simultaneously having relatively weak economies of scale (alternatively, diseconomies of scale) and relatively strong economies of scope with incumbent activities. Hypothesis III: A competitive equilibrium in the deregulated financial industry will consist of both specialized and multi-product financial firms, resulting in a mixed form of specialized and universal banking systems. Hypothesis IV: As world financial markets fully integrate and all countries consequently face this single, common world market, the financial structures of individual countries will become increasingly similar. Hypothesis V: A more universal banking system will dominate the deregulated financial industry in countries with relatively small financial markets, while a more specialized banking system will dominate in countries with relatively large financial markets. However, equilibrium will ultimately be mixed, with specialized and universal banks coexisting, as stated in Hypothesis III. Based on these hypotheses, this paper interprets the historical development of specialized vs. universal banking systems in major industrial countries as a process driven by the evolution of the financial market in each country - i.e. the change in the size of the financial market over time. In addition, this paper anticipates that the final equilibrium of the world financial industry, which is currently under the pressure of financial innovations and deregulation, will be a mixed equilibrium with both specialized boutiques and universal supermarket-type financial firms, instead of an exclusively specialized or universal banking system. Future research should seek continued theoretical elaboration and empirical verification of this paper's hypotheses.