The utilization of capital and the growth of output in a developing economy: The case of South Korean manufacturing

This paper presents the utilization rate of capital equipment in the S. Korean manufacturing industry during 1962–1971. The aggregate utilization rate is shown to have increased at an annual rate of about 8%. The level of utilization in S. Korea is found to be generally lower even in 1971 than in the U.S. in 1962, both at the aggregate and sectoral levels. The rise in the utilization rate is shown to have contributed nearly as much as investment has in the growth of manufacturing output. The influence of the residual component declines from 36% to 8% of the recorded growth of output when the increase in the utilization rate is properly allowed for.