Financial crisis and relative productivity dynamics in Korea: evidence from firm-level data (1992–2003) |
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Authors: | Keun Hee Rhee Hak K Pyo |
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Institution: | (1) Korea Productivity Center, 122-1 Jeokseon-dong, Jongro-Ku, Seoul, 110-751, Korea;(2) Economics Division, Seoul National University, San 56-1, Sillim-dong, Kwanak-Ku, Seoul, 151-746, Korea |
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Abstract: | We have estimated the relative TFP growth at firm level and analyzed the firm dynamics in view of entry and exit of firms
in Korea during 1992–2003, which includes the turbulent financial crisis of 1997–1998. Following Pyo and Ha, Hitotsubashi
J Econ 48(1): 67–81, (2007), we have adopted a gross output model rather than a value added model of relative TFP analysis. We have found that the cyclical
variation of productivity growth plays a dominant role in the decomposition effects before and after the 1997 financial crisis
in Korea. Productivity growth is modest before the crisis and strong after the crisis owing to the recovering market efficiency.
There is the likelihood that the productivity growth of stayers during the post-crisis period was significantly higher than
new entrants. The net entry effect is found to be more sensitive in small business and export-based firms than in large business
and domestic market-based firms. Our findings suggest that Korean firms have recovered a modest level of technical change
after its severe financial crisis owing to the improvement of management transparency and the build-up of market efficiency
during the IMF-mandated restructuring process. But since the entry effect is estimated to be still negative in Manufacturing
and the exit effect is negative in Service sector after the crisis, the Korean economy has not fully recovered its metabolism
in the post-crisis period and still lacks a creative destructive process to resume another round of sustainable growth path. |
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