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Productivity and Employment in a Developing Country: Evidence from Republic of Korea

Author

Listed:
  • Kim, Sangho

    (Honam University)

  • Lim, Hyunjoon

    (University of Rochester)

  • Park, Donghyun

    (Asian Development Bank)

Abstract

The paper empirically investigates the relationship between productivity and employment in Republic of Korea using structural vector autoregression (VAR) models. Productivity-enhancing technology shocks significantly increase hours worked, which lends support to the real business cycle theory. The results show that technology shocks can explain most elements of a business cycle both in the short and long run. On the other hand, demand shocks can only explain price fluctuations. The evidence thus suggests that Korean policy makers should give higher priority to supply-side policies that promote technological progress and innovation.

Suggested Citation

  • Kim, Sangho & Lim, Hyunjoon & Park, Donghyun, 2008. "Productivity and Employment in a Developing Country: Evidence from Republic of Korea," ADB Economics Working Paper Series 116, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0116
    as

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    References listed on IDEAS

    as
    1. Francis, Neville & Ramey, Valerie A., 2005. "Is the technology-driven real business cycle hypothesis dead? Shocks and aggregate fluctuations revisited," Journal of Monetary Economics, Elsevier, vol. 52(8), pages 1379-1399, November.
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    More about this item

    Keywords

    employment; Republic of Korea; productivity; structural vector autoregression; technology shocks;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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