MEASURING THE EVOLUTION OF KOREA’S MATERIAL LIVING STANDARDS 1980-2010
Based on a production-theoretic framework, we measure the effects of real output prices, primary inputs, multi-factor productivity growth, and depreciation on Korea’s real net income growth over the past 30 years. The empirical analysis is based on a new dataset for Korea with detailed information on labour and capital inputs, including series on land and inventories assets. We find that while over the entire period, capital and labour inputs explain the bulk of Korean real income growth, productivity growth has come to play an increasingly important role since the mid-1990s, providing some evidence of a transition from ‘input-led’ to ‘productivity-led’ growth. Terms of trade and other price effects were modest over the longer period, but had significant real income effects over sub-periods. Overall, real depreciation had only limited effects except during periods of crises where it bore negatively on real net income growth.
The vast majority of studies on economic growth have been concerned with the growth of gross domestic product (GDP), in other words with the growth of countries’ production. The OECD, in common with many other organisations and economists, has also approximated material living standards in terms of the level and growth of gross domestic product.