Hyunbae Chun (Sogang University) Hak K. Pyo (Seoul National University) Keun Hee Rhee (Korea Productivity Center) Structural Changes and Productivity Growth in Asian Countries The 3 rd Asia KLEMS Conference CIER, Taipei Taiwan, August 12-13, 2015

 A brief summary of current status of KIP DB and Asia KLEMS ◦ KIP DB 2014 and future revision ◦ Asia KLEMS DB update  Analysis on changing industrial sources of productivity growth in Korea ◦ Data on KIP DB and industry-level CHS intangibles ◦ Growth accounting analyses for the groups of ICT and CHS intangible industries 2

 KIP Industry Classification and Period ◦ Latest 2014 KIP DB ◦ 72-industry, (1993 SNA)  Asia KLEMS: 32-industry, (2) ◦ KIP DB: Tornqvist aggregation from 72 to 32 industries ◦ Base year: 2005 ◦ Data posted on the website, Korea, Japan, Taiwan, Indiawww.asiaklems.net ◦ Data received: China

 Need to incorporate 2008 SNA revision ◦ 2008 SNA based National Accounts released in 2014 ◦ 1993 SNA National Accounts Data ended in 2012  Problem: 2008 SNA based industry-level data of the National Accounts: ◦ 30-industry data available from 1970 (1954) to 2014 ◦ 82-industry data only available from 2000 ◦ Not available more detailed than 82 industry data: new IO tables only available for 2010 and after 4

 Industry classification ◦ Change from ISIC rev. 3 to ISIC rev. 4 ◦ Current industry classification of Asia KLEMS is ISIC rev. 3 ◦ Comparable to STAN and EU KLEMS 5

 Manufacturing industries have been a key industrial sector for productivity growth in Korea  Looking for a new industry group that became a key industrial sector explaining productivity growth in Korea 6

 ICT industries ◦ ICT-using, ICT-producing, and Non-ICT industries: Rhee and Pyo (2013) for Korea  Intangible-intensive industry ◦ Based on broad definition of intangibles including computerized information, innovative property, and economic competencies provided by Corrado, Hulten and Sichel (2006) ◦ Intangible versus non-intangible industries: Chun and Nadiri (2013) for Korea 7

 Using economy-level data, previous studies focus on the contribution of CHS intangible capital to (productivity) growth.  Using (detailed) industry-level data, this study focuses on differences in productivity growth of industries according to CHS intangible intensity. 8

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 Corrado, Hulten, and Sichel (CHS) Intangibles include ◦ Computerized Information (CI) ◦ Innovative Property (IP): Scientific & Non-scientific R&D ◦ Economic Competencies (EC): Brand equity and firm-specific resources 10

11 8.0% in 2011

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 Aggregate labor productivity (ALP) growth can be decomposed into (1) the sum of industry LP growth and (2) labor reallocation toward more productive industries (Stiroh, 2002; Jorgenson et al., 2007) ◦ Each industry i belongs to one of 4 industry groups 15

IntangibleNon-intangible ICT 6 industries (intangible & ICT) Electrical and electronic equipment Information and communication Machinery equipment Transport equipment Financial intermediation Business services 3 industries (non-intangible & ICT) Public administration and defense Education Culture and entertainment Non- ICT 3 industries (intangible & non-ICT) Food, beverages, and tobacco Petroleum, coal, and chemicals Precision instruments 15 industries (non-intangible & non-ICT) Agriculture, forestry, and fishing Mining and quarrying Textiles and leather Wood, paper, and printing Non-metallic mineral products Metal and fabricated metal products Furniture and other manufacturing Electricity, gas, and water supply Construction Wholesale and retail trade Restaurants and hotels Transport and storage Real estate and renting Health and social work Other service activities 16

ALP growth5.1% Contribution to ALP growth (1) Intangible and ICT LP Gr (2) Intangible and non-ICT LP Gr (3) Non-intangible and ICT LP Gr (4) Non-intangible and non-ICT LP Gr (5) Reallocation

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 Industry labor productivity growth can be decomposed into (1) capital deepening, (2) labor quality growth, and (3) TFP growth  Each industry i belongs to one of the 4 industry groups 19

ALP growth Contribution to ALP growth (1) Intangible and ICT industries (1A) Capital deepening (1B) Labor quality growth (1C) TFP growth (2) Intangible and non-ICT industries (2A) Capital deepening (2B) Labor quality growth0.1 (2C) TFP growth0.4 (3) Non-intangible and ICT industries (3A) Capital deepening (3B) Labor quality growth (3C) TFP growth (4) Non-intangible and non-ICT industries (4A) Capital deepening (4B) Labor quality growth0.2 (4C) TFP growth (5) Reallocation

ALP growth Contribution to ALP growth (1) Intangible and ICT industries (1A) Capital deepening (1B) Labor quality growth (1C) TFP growth (2+3) INT&NICT + NINT&ICT (2A+3A) Capital deepening (2B+3B) Labor quality growth (2C+3C) TFP growth (4) Non-intangible and non-ICT industries (4A) Capital deepening (4B) Labor quality growth0.2 (4C) TFP growth (5) Reallocation

ALP growth5.1% Contribution to ALP growth (1) Manufacturing industries (1A) Capital deepening (1B) Labor quality growth (1C) TFP growth (2) Non-manufacturing industries (2A) Capital deepening (2B) Labor quality growth (2C) TFP growth (3) Reallocation

 Aggregate labor productivity growth (ALPG) in Korea slowed down from to periods.  Contribution of intangible-ICT-intensive industries to ALPG increased.  Contributions of labor reallocation and tangible-non- ICT industries to ALPG significantly decreased.  The findings suggest that the Korean economy structurally transformed toward knowledge-based economy. 23