Analysis of productivity

1. The Determinants of Productivity in
the Green-Growth Industry in Korean
-Information and Communication
Technology Industry(ICT) -
Dr. GI-DON AN
Chungnam National University
(Daejeon in Korea)
Department of Economics

2. 1. Introduction
(1) Information and Communication Technology(ICT)
 Information Technology(IT), Telecommunication,
Broadcasting Media, other all types of audio and video
processing.
 ICT industry is very important for the green-growth,
sustainable development.
 ICT industry requires long time and huge investment.

3. 1. Introduction (Cont’d)
(2) ICT industry is one of the key industries in Korea.
 Korea ranks first in usage component of IT in the world.
 Korea ranks third in terms of Impact of ICT on new
services and products.
 The Contribution of ICT to Korean GDP growth is about 30%.
 ICT played a key role in recovery of economic crisis
in the late 1990s.
(3) Korean ICT has experienced Sandwich situation
between the advanced and emerging countries.

4. 1. Introduction (Cont’d)
(4) Purposes of this study
 Analyzing the Productivity of ICT industry
Productivity analysis will enable enhance the efficiency of
government industrial policies and competiveness of ICT
industry.
 Investigation of determinants of Total Factor Productivity
(TFP) growth in the Korean ICT industry.
 Analysis of TFP and TFP determinants is made based on
the firm-level(small, medium, large).

5. II. Present Condition & Productivity
of Korean ICT Industry

6. 1. Present Condition of Korean ICT Industry
(1) Growth rate and Contribution of Korea ICT to GDP
(%) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
GDP
8.8 4.0 7.2 2.8 4.6 4.0 5.2 5.1 2.3 0.2
Growth rate
ICT
Industry 34.5 8.7 15.9 13.7 17.1 11.7 12.6 8.7 6.8 5.3
Growth rate
Contribution
6.4 6.7 7.2 8.0 8.9 9.6 10.2 10.6 11.0 11.6
to GDP
Source: The Bank of Korea

7. 1. Present Condition of Korean ICT Industry (Cont’d)
(2) Decreasing Growth Potential of Korean ICT
 Hardware has reached the world’s top class.
 Latecomers have accelerated to chase Korean ICT hardware.
A Technological Gap between Korea and China has
decreased from 2.6 years in 2003 to 1.7 years in 2006.
 ICT Software has become a growth engine.
 Competiveness Index of ICT Software
India : 4.30
U.S.A. : 3.06
China : 2.97
Korea: 2.94,
 Market Share of Korean ICT is 1.8% of world Software market.

8. (3) Contributing rates of Capital, Labor, TFP
to GDP growth in G7 & Korea
Period 1995-2003
Sources of Growth(% )
Economy GDP
Capital Labor TFP
Growth
ICT Non-ICT Hours Quality
Canada 2.51 0.65 0.61 0.68 0.16 0.42
France 1.92 0.36 0.75 0.22 0.07 0.52
Germany 0.86 0.40 0.50 -0.24 0.09 0.11
Italy 1.48 0.46 0.96 0.61 0.27 -0.82
Japan 1.39 0.56 0.26 -0.32 0.22 0.67
U.K. 2.55 0.65 0.19 0.38 0.26 1.07
U.S.A. 3.56 0.88 1.01 0.50 0.17 0.99
All Group 2.56 0.69 0.74 0.28 0.18 0.67
Korea 4.09 0.46 1.67 0.86 0.26 0.85
Source: Jorgenson and Vu(2005)

9. 2. Productivity of Korean ICT Industry
0.02
(1) TFP Growth Rate of ICT Industry
0.01
0.00
-0.01
-0.02
-0.03
-0.04
-0.05
-0.06
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

10. (2) TFP, LP, CP Growth Rates of ICT Industry
0.25
Labor Productivity
0.20
0.15
0.10
Capital Productivity
0.05
0.00
-0.05
TFP
-0.10
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

11. (3) TFP Growth Rate of ICT Industry by Firm Size
0.030
0.020 Medium
0.010 Large
0.000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
-0.010
-0.020
-0.030
Small
-0.040
-0.050
-0.060
-0.070

12. III. Estimation of Determinants of
TFP of Korean ICT

13. 1. A result of estimation for determinants of TFP
in Korean ICT industry
2000~2009 2000~2004 2005~2009
R2 0.011 0.0372 0.0047
Size 0.000004 0.000006 0.00002
(t-value) (0.34) (0.27) (0.35)
R&D 0.0166** 0.3363** 0.0217**
(t-value) (2.23) (6.10) (2.48)
AGE 0.0257** 0.0395** 0.0214**
(t-value) (7.00) (5.67) (2.16)
Debt ratio -0.0000003 -0.0000002 -0.0000007
(t-value) (-.0.06) (-0.06) (-0.07)
Note: *, **, *** denote 10%, 5%, and 1% significance, respectively.

14. 2. Determinants of TFP in Korean ICT industry
based on size of companies
Year 00-09 00-04 05-09
0.00008 0.0002 0.0012
Small
(0.31) (0.79) (1.27)
0.00003 0.000003 0.00009
Medium
(0.31) (0.21) (1.25)
Size
0.00000002 0.00000001 0.00000009
Large
(0.84) (0.14) (1.03)
0.000004 0.000006 0.00002
Total
(0.34) (0.27) (0.35)
0.0165** 0.3337** 0.0212589**
Small
(2.02) (5.45) (2.2)
0.2624** 0.1705** 0.5104**
Medium
(2.14) (2.17) (1.98)
R&D
0.0051** 0.0011** 0.0019**
Large
(2.68) (2.08) (2.22)
0.0166** 0.3363** 0.0217**
Total
(2.23) (6.10) (2.48)
Note: *, **, *** denote 10%, 5%, and 1% significance, respectively.

15. 2. Determinants of TFP in Korean ICT industry
based on size of companies (Cont’d)
Year 00-09 00-04 05-09
0.0313** 0.0503** 0.0261**
Small
(6.86) (5.71) (2.19)
0.0038** 0.0018 0.0033
Medium
(4.46) (1.12) (1.16)
Age
0.0001** 0.00006 0.00004
Large
(3.17) (0.38) (0.63)
0.0257** 0.0395** 0.0214**
Total
(7.0) (5.67) (2.16)
-0.0000004 -0.0000005 -0.0000009
Small
(-0.08) (-0.1) (-0.08)
0.0000007 0.000004 -0.00002
Medium
(-0.16) (0.38) (-1.28)
Debt ratio
0.0000002 0.00000006 -0.0000001
Large
(1.24) (-0.23) (-0.29)
-0.0000003 -0.0000002 -0.0000007
Total
(-.0.06) (-0.06) (-0.07)
Note: *, **, *** denote 10%, 5%, and 1% significance, respectively.

16. IV. Conclusion
(1) Productivity of Korean ICT Industry
 TFP of Koran ICT industry has grown.
 Especially, TFP of small and medium firms has rapidly grown.
 However, Korean ICT industry has focused on Hardware.
 Therefore, it should invest on Software.
(2) R&D & Age are the key determinants of
Productivity of Korean ICT Industry
 Especially, Korean ICT industry should make a huge
investment on the venture firms which work on software and
ICT service convergence.