Korean Economic Growth Factor Analysis with Total Factor Productivity

Abstract

Korea has recorded negative real GDP growth only three times in the last 60 years: the oil crisis in 1980, the financial crisis in 1998, and the COVID-19 crisis in 2020. While the economic recession for the first time in 22 years may be attributed to COVID-19, it is more noteworthy is that the growth rate of the Korean economy has been continuously declining. To find counter measures for the decline in the economic growth rate, it is necessary to analyze the cause of the decline in the growth rate. The factors of economic growth can generally be divided into changes in input factors such as labor and capital and productivity. We analyzed the relative contribution of each input factor from 1982 to 2020. Our result suggests that the contributions of capital and labor to economic growth are decreasing over time, and the contribution of TFP is gradually increasing. This study is employing annual time series data to provide up-to-date estimates of TFP and exploring the determinants of TFP to help detect future growth engines for the long-run sustainable development in Korea.