Productivity and Exports in Korea: Comparisons with China and Japan

This article aims to assess Korea's competitiveness in manufacturing exports, focusing on the rivalry among the three countries. To this end, we examine the productivities of C-J-K and estimates the effect of relative productivity on exports in Korea. It finds that first, China has drastically caught up with Korea since 2000, while there still exists a relatively large productivity gap between Japan and Korea. This is reminiscent of the sandwich theory, meaning that Korea is literally sandwiched between a fast-growing China and a technologically advanced Japan. Second, technical efficiency, an important determinant of productivity, has improved rapidly and steadily in China during the 2000s, while it has declined in Korea and Japan since the global financial crisis. Third, there seems to be a positive link between productivity and exports in Korea. In particular, a relative increase in productivity to China and Japan is highly related to its export performance. Not only technological progress, but also the enhancement of production efficiency is important for boosting export volumes and global market share.