Korea's Economic Growth and Catch‐up: Implications for China

Abstract

This study investigates the economic growth and catch‐up of Korea over the past half century. Korea's growth experience confirms the prediction of a “conditional convergence” theory. Cross‐country regression further suggests that Korea's strong catch‐up to the USA is also attributable to its favorable growth factors such as strong investment, lower fertility, greater trade openness, and improvements in human resources and rule of law. However, as Korea catches up to the USA and its steady‐state level in per worker output, it will be subject to a growth slowdown unless improvements are made in those growth factors. While manufacturing‐oriented and export‐oriented development has served Korea's success well, poor productivity performance in the services sector has hampered overall productivity growth. Korea's experience implies that China's potential growth rates are likely to slow in the coming decades due to the convergence effect and with the rebalancing toward a domestic consumption and services‐based economy. China needs to upgrade its rule of law, reform state‐owned enterprises and improve productivity, particularly in its services sector, to sustain strong growth.

Economic Complexity and Human Development: DEA performance measurement in Asia and Latin America

“…On the other hand, Asian countries have invested in human capital and technological innovation have made their economies more robust and complex (Lee, 2016a).…”

“…According to Lee (2016a), trade open the door to the import of cheaper intermediate goods and access to advanced Technologies which contributed to the rapid growth of the productivity of the industry. The export policy for industrialization, encouraged the performance of exporters by generating comparative advantage of Korean companies in international trade.…”

“…In order for China to move from a medium high economy to a high economy, it is necessary to develop technologically more sophisticated industries (Lee, 2016a). China's technological progress depends on policies that promote technological innovation, increased R&D investment, and industrial modernization.…”

“…China's inefficiency is according to Lee (2016a) results, as the author argues that China needs to improve human capital and sophisticate country's industrial output.…”

Productivity, Innovation and China’s Economic Growth

“…Given that services generated more than 50 per cent of China's total GDP in 2016, Liu and Yang (2015) have argued that China's future growth relies on improvement in the performance of productivity growth in the service sector. Lee (2016) made a similar argument by examining Korea's economic growth and catch-up process. Lee reckons Korean productivity growth was affected by the poor performance in services and China should avoid this by improving productivity in the service sector.…”