• International Area Studies Review
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• v.22 no.4
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• pp.19-35
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• 2018

This paper is to estimate the total factor productivity(TFP) in the Korean manufacturing and service industries during the period 1975:1-2016:4 using the stochastic frontier analysis model. In order to analyze the determinants for the total factor productivity the paper estimates the industry-specific determinant elasticities of TFP using the autoregressive distributed model. The industry-specific determinants, which reflect the industrial structure and properties include markup, the ratio of capital to labor(KL), and the ratio of foreign intermediate goods (FIG) to industrial output. The average value for total factor productivity growth was estimated to be 0.0199 in manufacturing and 0.0063 in the service industry. The markup and KL elasticities of TFP were estimated to be 2.481 and 0.651 in manufacturing respectively and -1.403 and 0.042 in the service industry respectively. The empirical results suggest that the industrial markup and the ratio of capital to labor have had decisive effects on the changes in the total factor productivity in the Korean manufacturing and service industries during the period 1975:1-2016:4.