Sources of employment growth in the Korean manufacturing sector, 1963-1973 Employment growth in the Korean manufacturing sector

Date
1976
Authors
Park, Dong Un
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The Korean manufacturing sector has achieved an annual rate of 11.3 percent employment growth over the period 1963 to 1973, which is one of the highest rates among LDC's. To explain this high growth rate, we specified the sources of employment growth on the basis of the demand for labor function derived from the CES production function. The sources of employment growth were defined as: real wage growth, returns to scale, domestic share of value added, growth of the domestic sector, export share of value added, growth of the export sector and residual. The purpose of this study was to measure how those sources contributed to employment growth, what sources were responsible for the high growth rate, and which industries made major contributions to employment growth. The analysis was conducted for nineteen 2-digit industries as well as for the total manufacturing sector. Following is a brief summary of the main conclusions. (1) For the total manufacturing sector, the estimate of the elasticity of substitution within the framework of the ACMS approach was around 0.6. Real wage growth combined with the elasticity of substitution, therefore, has a substantial negative effect on employment growth because of a significant substitutability between capital and labor. Elasticities of substitution were estimated also at the 2-digit industrial level. Except for three industries, elasticities were less than one, though estimation equations were different. (2) For the total manufacturing sector, the annual rate of 8.6 percent real wage growth, combined with the real wage elasticity of -0.56, reduced employment growth by 4.8 percent per year. At the 2-digit level, the real wage variable was statistically significant in only seven industries. In general, real wage growth has a substantial negative effect on employment growth in a limited number of industries. (3) For the total manufacturing sector, the annual rate of 23.0 percent value added growth, combined with the value added elasticity of 0.78, increased employment growth by 17.9 percent per year. If we compare the positive contribution from value added growth with the negative one from real wage growth, we can see that the positive contribution exceeds the negative one by more than three and a half times. This is the main reason why the K0rean manufacturing sector could have achieved such a high growth rate of employment. At the 2-digit level, the value added variable was statistically significant in seventeen industries. Furthermore, the growth rate of value added and the value added elasticity are much higher than the counterparts of the real wage rates in all industries. (4) Because the export expansion has played a key role in the Korean economy, we extracted the contribution of export to value added growth. For the total manufacturing sector, the annual rate of 46.2 percent export growth contributed 10.1 percentage points of the annual 23.0 percent value added growth. At the 2-digit level, the high growth rate of export, which ranges from 22 to 80 percent, contributed more than half of the value added growth in twelve industries. Based on value added growth from the export sector and the estimate of the value added elasticity, we can find that, ceteris paribus, the export expansion contributed 5 percentage points of the annual rate of 11.3 percent employment growth in the total manufacturing and about half of employment growth in twelve 2-digit industries. (5) Regarding the individual industries' contributions to employment growth, there are five leading industries: textiles, clothes, miscellaneous, electrical and food. The sum of the contributions made by these five industries is 7.1 percentage points of the annual 11.3 percent employment growth. This finding also suggests that high employment growth in the Korean manufacturing sector was made possible by the development of the labor-intensive industries which was the result of the export expansion. (6) We found that there were increasing returns to scale in almost all industries and this has a substantial negative effect on employment growth, even though the negative contribution has already been accounted for in the net contribution of value added growth.
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Typescript.
Thesis (Ph. D.)--University of Hawaii at Manoa, 1976.
Bibliography: leaves [101]-106.
Microfiche.
vii, 106 leaves
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Labor supply -- Korea, Manufactures -- Korea, Korea
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Theses for the degree of Doctor of Philosophy (University of Hawaii at Manoa). Economics; no. 899
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