Measuring the evolution of Korea’s material living standards 1980–2012

Abstract

Based on a production-theoretic framework, we measure the effects of real output prices, primary inputs, and multi-factor productivity growth on Korea’s real income growth over the past 30 years. The empirical analysis is based on a new dataset for Korea with detailed information on labor and capital inputs, including series on land and inventories assets. We find that while over the entire period, capital and labor 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.