The Role of ICT in Economic Growth of Korea - cerge-ei
Transkript
The Role of ICT in Economic Growth of Korea - cerge-ei
The Role of ICT in Economic Growth of Korea: Productivity Changes across Industries since 1985 January, 29, 2009 Chang-Ho Yoon*, Kyoung-Youn Na** and Hyun-Joon Jung*** * Professor, Department of Economics, Korea University ** Ph.D. student, Department of Economics, Korea University *** Researcher, Korea Information Society Development Institute The Role of ICT in Economic Growth of Korea I. Introduction II. Empirical Model and Estimation III. Concluding Comments The Role of ICT in Economic Growth of Korea I. Introduction • Information Technology and Productivity Growth in OECD countries (2003): Diverging patterns of ICT diffusion across countries and industries, and differential impact over time. • Need to examine a case of ICT leading country where a sustained increase of productivity has been traced in ICT intensive industries. • Recovery of Korea after financial turmoil in the late 1990s. The Role of ICT in Economic Growth of Korea • Since the financial turmoil, capital deepening in Korea has been relatively modest compared to the previous rapidly growing period. The annual rate of growth of net capital stock of the Korean economy over the period of 1970- 2005 was 10.8%, while 6.0% for 1998 – 2005. In the case of ICT sector, the rate was 41.2% for the period of 1984-1998, and then reduced to 3.4% for 1998 – 2005. • The trend growth rate of Korea has been lowered after the crises with much less volatility until 2007. The Role of ICT in Economic Growth of Korea - Source : Bank of Korea The Role of ICT in Economic Growth of Korea • Sources of GDP growth using best estimate and harmonized prices - Source : Takahito Kanamori and Kazuyuki Motohashi (2007) The Role of ICT in Economic Growth of Korea • Decomposition of TFP Growth - Source : Takahito Kanamori and Kazuyuki Motohashi (2007) The Role of ICT in Economic Growth of Korea • Literature on growth enhancing effects of ICT: Jorgenson, D and K. Stiroh (1999, 2000), Stiroh, K. (2002), Jorgenson, D and Motohashi, K (2005), Kanamori, T and Motohashi, K (2008) • Suspicious perspective on the New Economy: Gordon (2000) • Roller and Waverman (2001) on the positive role of ICT infrastructure in economic growth. The Role of ICT in Economic Growth of Korea II. Empirical Model and Estimation Methodological comments on previous research (1) Technology specification – Suppose the economy is divided into ICT producing sector and using sector. Then ICT capital stock of ICT producing sector often becomes the ICT infrastructure of the whole economy and complementary to ICT capital of ICT using sector (e.g. fixed and wireless networks, R&D facilities) – The effects of ICT on productivity of ICT using industry can be underestimated if focusing on ICT capital of that industry alone. The Role of ICT in Economic Growth of Korea 0 .1 .2 .3 .4 • The Ratio of ICT capital stock (OECD 2002 classification) 1985 1990 1995 year ICT_MAN ICT - Source : EU KLEMS 2000 ICT_SER 2005 The Role of ICT in Economic Growth of Korea (2) OECD ICT sector definition- capital measurement – OECD ICT sector definition(2007): “The production (goods and services) of a candidate industry must primarily be intended to fulfill or enable the function of information processing and communication by electronic means, including transmission and display.” – New ICT definition exclude the sentence that “Industries producing products (technologies) that use electronic processing to detect, measure, record or control a physical process.” The Role of ICT in Economic Growth of Korea • ICT Convergence sectors use more and more ICT intermediate inputs or ICT capital which are not classified as ICT. – Motor vehicle is a good example. – The components of Motor vehicle such as ECU, sensors and embedded SW are not classified as ICT. – ECU or sensors uses electronic processing to detect, measure, record or control a physical process (sensing, computing and communicating). The Role of ICT in Economic Growth of Korea (3) Inter-industry spill-over effects – In many competitive or oligopoly industries, an investment game in ICT often results in cost and price reduction, and wealth redistribution from firms to consumers. Gain in consumer surplus boosts consumption in other industries. – Due to heavy development cost and low marginal cost of ICT equipment and software, strong network effects prevail among the users across industries (e.g. software for internet security). The Role of ICT in Economic Growth of Korea Industrial Classifications - Source: EU KLEMS The Role of ICT in Economic Growth of Korea Estimation of spill-over effects • We consider aggregate production function Yit = f ( Lit , K it , ICK t , t ) • ICK t is aggregate ICT capital stock at t. • Let θ it denote the proportion of ICT capital stock of industry i at t. • Then ICKt = ∑θit K it i The Role of ICT in Economic Growth of Korea 1. Standard Cobb-Douglas Function Yit = Fi ( Ai (t ), Lit , K it ) = Bi (t ) Lαit K itβ ICK tγ ICK tγ = (∑θ it K it )γ α , β ,γ > 0 i 2. Other specification to emphasize the dependency of industry spill-over on θ it α β γ ⋅θ it Yit = Bi (t ) Lit K it ICK t The Role of ICT in Economic Growth of Korea • Specification for industrial value added. All the variables are in natural logarithms. yit = β n nit + β k kit + β ick ickt + (ηi +ν it + mit ) ν it = αvi ,t −1 + eit | α |< 1 eit , mit ~ MA(0) • Both n and k are determined endogenously within the system (depend on current and lagged output levels as well as technology shocks) The Role of ICT in Economic Growth of Korea • Dynamic representation (1) yit = π 11nit + π 12 ni ,t −1 + π 13kit + π 14 ki ,t −1 + π 15ickt + π 16ickt −1 + π 17 yi ,t −1 + (η1*i + w1it ) (2) yit = π 21nit + π 22 ni ,t −1 + π 23kit + π 24 ki ,t −1 + π 25θit ⋅ ickt + π 26θit ⋅ ickt −1 + π 27 yi , t −1 + (η2*i + w2it ) • In either case we can obtain consistent estimates of the unrestricted parameter vector π = (π 1 , π 2 , π 3 , π 4 , π 5 , π 6 , π 7 ) using the GMM methods. The Role of ICT in Economic Growth of Korea Data Variables Definition GO Gross output at current basic prices (million won) VA Gross value added at current basic prices (million won) GO_P Gross output, price indices, 1995 = 100 VA_P Gross value added, price indices, 1995 = 100 L Total hours worked by employees (millions) KICT ICT assets, Real fixed capital stock, 1995 prices K All assets, Real fixed capital stock, 1995 prices LAB Labor compensation (million won) CAP Capital compensation (million won) TFP TFP (value added based) growth, 1995=100 - Source : EU KLEMS The Role of ICT in Economic Growth of Korea • Descriptive Statistics Variable Obs Mean Std. Dev. Min Max VA 630 15.862 1.011 13.098 18.347 n 630 6.449 1.106 3.341 8.271 k 630 16.655 1.366 13.359 20.150 ick 630 17.015 0.772 15.658 18.060 Learning 630 18.996 1.064 15.676 21.406 rTFP 600 0.033 0.074 -0.243 0.372 rGO 600 0.073 0.097 -0.459 0.942 rick 600 0.120 0.043 0.039 0.185 θ 630 0.039 0.055 0.001 0.339 (ln level) The Role of ICT in Economic Growth of Korea Estimation of production function The Role of ICT in Economic Growth of Korea • Production Function Estimation Result (conti…) *, ** and *** denote significance of the test statistic at the 10, 5 and 1% level of significance, respectively. The Role of ICT in Economic Growth of Korea • rTFP Regressions d ln Ait = α + β d ln GOit + γ ln Learning it + δd ln ICK t + ε it • Ait is TFP of industry i in year t. • GOit is Gross Output of industry i in year t. • Learning it is cumulative Gross Output of industry from year t-5 to year t-1. • ICK t is ICT capital stock of all industries in year t. The Role of ICT in Economic Growth of Korea • rTFP Regressions Result *, ** and *** denote significance of the test statistic at the 10, 5 and 1% level of significance, respectively. The Role of ICT in Economic Growth of Korea • Dummy Variable rTFP Regressions (1) d ln Ait = α + β D + γC + δd ln GOit + φd ln ICK t + ε it • D = 1 if t ≤ 1998 , D = 0 otherwise. • C = 1 if ICT using industry, C = 0 if ICT producing industry. The Role of ICT in Economic Growth of Korea • Dummy Variable rTFP Regressions Result *, ** and *** denote significance of the test statistic at the 10, 5 and 1% level of significance, respectively. The Role of ICT in Economic Growth of Korea • Continuous ICT Variable rTFP Regressions (2) d ln Ait = α1 + β1D ⋅ d ln ICK t + δ1d ln GOit + φ1d ln ICK t + ε1it (3) d ln Ait = α 2 + β 2 D ⋅ d ln ICK t + γ 1C ⋅ θit + δ 2 d ln GOit + φ2 d ln ICK t + λ1θit + ε 2it The Role of ICT in Economic Growth of Korea • Continuous ICT Variable rTFP Regressions Result *, ** and *** denote significance of the test statistic at the 10, 5 and 1% level of significance, respectively. The Role of ICT in Economic Growth of Korea -.04 -.02 total_r_TFP 0 .02 .04 .06 • Aggregate TFP growth rate 1985 – Source : EU KLEMS 1990 1995 year 2000 2005 The Role of ICT in Economic Growth of Korea • ICT producing industries 13 ELECTRICAL AND OPTICAL EQUIPMENT 23 POST AND TELECOMMUNICATIONS id = 13 Variable Obs indus_rTFP Mean 20 0.1076 Std. Dev. 0.0847 id = 23 Variable indus_rTFP Obs Mean 20 0.1190 Std. Dev. 0.0576 The Role of ICT in Economic Growth of Korea • ICT producing industries 23 -.4 -.2 0 .2 .4 13 1985 1990 1995 2000 2 0 0 51 9 8 5 1990 1995 2000 2005 year i ndus_r_T F P total_r_TF P G r ap h s b y id – ICT producing industries (both manufacturing and service) show consistently higher productivity growth. During the financial crisis, still positive growth. The Role of ICT in Economic Growth of Korea • ICT intensive industries – The proportion of ICT capital(θ ) is greater than the average proportion of all the industries. The status can change over time. • Among the industries which use ICT intensively, select industries with TFP growth rate persistently higher than economy wide growth rate since 2002. 8 Chemicals and chemical 12 MACHINERY, NEC 14 TRANSPORT EQUIPMENT The Role of ICT in Economic Growth of Korea • ICT intensive industries (code 8, 12, 14) id = 8 Variable Obs indus_rTFP Mean 20 0.0524 Std. Dev. 0.0453 id = 12 Variable Obs indus_rTFP Mean 20 0.0745 Std. Dev. 0.1079 id = 14 Variable indus_rTFP Obs Mean 20 0.0648 Std. Dev. 0.0870 The Role of ICT in Economic Growth of Korea • ICT intensive industries 14 -.4 -.2 0 .2 .4 12 1985 1990 1995 2000 2 0 0 51 9 8 5 1990 1995 2000 2005 ye a r i n d u s_ r _T F P to ta l_ r _ TF P G r ap h s b y id – Among ICT intensive industries, industries 12 and 14 show high volatility. The Role of ICT in Economic Growth of Korea • ICT intensive industries (conti…) -.4 -.2 0 .2 .4 8 1985 1990 1995 year indus_r_TFP 2000 2005 total_r_TFP G raphs by id – Industry 8 shows consistently higher productivity growth with small volatility. The Role of ICT in Economic Growth of Korea • ICT intensive service industry 24 FINANCIAL INTERMEDIATION id = 24 Variable Obs Mean Std. Dev. indus_rTFP 20 0.0447 0.0995 The Role of ICT in Economic Growth of Korea • 23 Post and Telecommunications • 24 Financial Intermediation 24 -.4 -.2 0 .2 .4 23 1985 1990 1995 2000 20051985 1990 1995 year indus_r_T FP G rap h s b y id total_r_TFP 2000 2005 The Role of ICT in Economic Growth of Korea • Service industries with increasing ICT intensity since mid 1990s 18 19 20 Sale, maintenance and repair of motor vehicles and motorcycles; retail sale of fuel Wholesale trade and commission trade, except of motor vehicles and motorcycles Retail trade, except of motor vehicles and motorcycles; repair of household goods The Role of ICT in Economic Growth of Korea Right axis θ =share .2 .1 0 -.1 -.05 0 .05 .1 .015 .02 .025 .03 19 .015 .02 .025 .03 18 1998 2000 2002 2004 2006 0 .1 .015 .02 .025 .03 20 -.1 • 1998 2000 2002 2004 2006 year indus_rTFP share total_r_TFP Graphs by id – ICT intensity rises and then declines recently. Better performance recently. The Role of ICT in Economic Growth of Korea .2 .25 .3 .35 .4 • Export ratio of ICT using industry and producing industry 1990 1995 2000 year ex_ratio_ICT_high – Source : Bank of Korea 2005 ex_ratio_ICT_pro 2010 The Role of ICT in Economic Growth of Korea 50 100 150 200 • Export volume indices (1995=100) 1990 1995 2000 year ex_vol_ICT_high ex_vol_sum - Source : Bank of Korea 2005 ex_vol_ICT_pro 2010 The Role of ICT in Economic Growth of Korea III. Concluding Comments • In contrast to previous research, ICT has strong effects on the productivity of ICT using export industries (notwithstanding ICT producing industries). • Dynamic comparative advantage has been revealed toward the ICT using export industries which have managed to adopt convergent technologies. However from the 4th quarter of 2008, exports began to decline rapidly. • Does technology convergence extend to other promising industries? 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