Working Paper No. 02-24

Productivity Growth in Newly Developed Countries -- The Case of Korea and Taiwan
Frank S.T. Hsiao and Changsuh Park
December 2002

ABSTRACT

Using the Malmquist productivity index, the efficiency change index, and the technical change index, this paper compares the productivity growth of 15 matche manufacturing sectors of Korea and Taiwan. The distance functions are derived by using industry-wide production frontiers from 1979 to 1996. We find that the efficiency growth rates for both countries are high and are the predominant component of productivity, and that technology, and thus productivity, growth rates are much higher in Taiwan than in Korea. At a disaggregated level, there is more similarity in technology growth, and less or none in efficiency growth. In both countries, productivity growth is similar, but traditional industries rely more on efficiency, basic industries on technology, and high-tech industries on both. The petroleum and coal products sector is consistently the major innovator of the manufacturing industry in both countries, but the minor innovators differ.

Keywords: productivity growth, Malmquist Indexes, Korea and Taiwan, economic growth.

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