Baek, Yong-chun, Randall Jones, and Michael Wise, 2004, “Product Market Competition and Economic Performance in Korea,” Economics Department Working Paper No. 399, (Paris: Organization for Economic Cooperation and Development).
Bank of Korea, 2005, “Causes of Deterioration in the Growth Potential of and Future Outlook for the Korean Economy,” mimeograph, translated from Korean version.
Johnston, A., D. Porter, T. Cobbold, and R. Dolamore, 2000, Productivity in Australia’s Wholesale and Retail Trade, Staff Research Paper, October (Canberra: Productivity Commission, AusInfo).
Kalirajan, Kaleeswaran, 2000, Restrictions on Trade in Distribution Services, Staff Research Paper, August (Canberra: Productivity Commission, AusInfo).
Kang, Kenneth, and Jacques Miniane, 2004, “Too Small to Fail? Restructuring Korea’s Small and Medium Enterprise Sector” (unpublished; Washington: International Monetary Fund).
Kim, Hyun-Jeong, 2006, “The Shift to the Service Economy: Causes and Effects,” July (Seoul: Institute for Monetary and Economic Research, Bank of Korea).
Kim, Jong-Il, and June-Dong Kim, 2000, “Liberalization of Trade in Services and Productivity Growth in Korea,” KIEP Working Paper No. 00-10, (Seoul: Korea Institute for International Economic Policy).
Korea Chamber of Commerce and Industry, 2004, Survey of Managerial Status and Views of Small Retail Owners, translated from Korean version (October 29).
Lee, Soohyung, 2005, “What’s the Matter with Korea’s Service Sector—And What Can Be Done to Fix It?” mimeograph (Washington: International Monetary Fund).
Ma, Henry, 2001, “Potential Output, The Output Gap, and Inflation in Korea,” in Republic of Korea: Selected Issues, IMF Country Report No. 01/101 (Washington: International Monetary Fund).
Min, Ko Joeng, 2005, “Making the Service Industry Globally Competitive,” Korea Economic Trends, Vol. 9, No. 30, pp. 13–20 (Seoul: Samsung Economic Research Institute).
Ministry of Commerce, Industry and Energy, 2002, Survey of Small and Medium Retail Stores, translated from Korean version, (May 21).
N’Diaye, Papa, 2006, “Japan’s Potential Output and Productivity Growth,” in Japan: Selected Issues, IMF Country Report No. 06/276 (Washington: International Monetary Fund).
Nguyen-Hong, Duc, 2000, Restrictions on Trade in Professional Services, Staff Research Paper, August (Canberra: Productivity Commission, AusInfo).
Nicoletti, Giuseppe, and Stefano Scarpetta, 2003, “Regulation, Productivity and Growth: OECD Evidence,” Economic Policy Paper (Paris: Organization for Economic Cooperation and Development).
Organization for Economic Cooperation and Development (OECD), 2000, Assessing Barriers to Trade in Services: Retail Trade Services (Paris).
Organization for Economic Cooperation and Development (OECD), 2005b, Growth in Services: Fostering Employment, Productivity and Innovation, Meeting of the OECD Council at Ministerial Level (Paris).
Parham, Dean, 2002, “Productivity and Policy Reform in Australia,” International Productivity Monitor, No. 5 (Canberra: Australia Productivity Commission).
Presidential Commission on Small and Medium Enterprises, 2005, Extended Meeting of Special Committee for SMEs, translated from Korean version (June 1).
Pyo, Hak-Kil, and Bongchan Ha, 2006, “The Estimation of Potential GDP in Korea: A Review,” mimeograph (Seoul: National University).
Pyo, Hak-Kil, Kuen Hee Rhee, and Bongchan Ha, 2006, “Growth Accounting and Productivity Analysis by 33 Industrial Sectors in Korea (1984–2002),” mimeograph (Seoul: National University).
Salgado, Ranil, 1999, “Productivity Growth and Structural Reform,” in Australia: Selected Issues, IMF Country Report No. 00/24 (Washington: International Monetary Fund).
Small and Medium Business Association, 2005, “Policies for Activating Traditional Retail Shops,” translated from Korean version (June 11).
Wölfl, Anita, 2005, “The Service Economy in OECD Countries,” in Enhancing the Performance of the Services Sector (Paris: Organization for Economic Cooperation and Development).
Young, Alwyn, 1995, “The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience,” Quarterly Journal of Economics, Vol. 110, No. 3, pp. 641–80.
Zebregs, Harm, 2003, “Long-Run Economic Growth in Korea,” in Republic of Korea: Selected Issues, IMF Country Report No. 03/80 (Washington: International Monetary Fund).
Prepared by Varapat Chensavasdijai.
See Chapter VI for the fiscal implications of population aging in Korea.
For the wholesale and retail trade, and hotels and restaurants sector, labor productivity is only 23 percent of that in manufacturing.
Wölfl (2005) finds a negative relationship between the share of services in total value added or employment and aggregate productivity growth for OECD countries during 1990–2001.
In terms of employment, the service sector accounts for 65 percent of the labor force in 2005.
Small variations in the participation rate do not affect the overall potential output trends much. See OECD (2005a) for projections of Korea’s labor force under different scenarios for the participation rates. The labor force trend is adjusted to allow for quality changes, by taking into account each employed group’s level of educational attainment and relative wages.
Capital stock estimates for Korea, along with the National Wealth Survey (NWS), were discontinued by the National Statistical Office in 1997. Thus we compute the initial capital stock in a particular year following the procedure outlined in Young (1995), and use the perpetual inventory method to estimate capital stock for the remaining years. This methodology was adopted in Zebregs (2003), but capital stock was also adjusted to allow for quality changes. The adjustment produced a similar series to the raw capital stock series. Pyo et al. (2006) estimate Korea’s capital stock with a similar methodology, linking one benchmark year for capital stock in the NWS with investment data from the national accounts, and also provide capital stock series for each economic sector.
Potential output growth estimates for the United States are based on Fund staff projections for 2006–2011 and the OECD Economic Outlook for the remainder of the projection period. Comparisons with other countries, such as Japan, are difficult given the uncertainty surrounding the path of potential output. For example, N’Diaye (2006) estimates Japan’s potential output growth to be between 1.7 and 2.3 percent, depending on the estimated magnitude of the impact of structural reforms.
Natural greenbelt areas are designated development-restricted zones in urban districts, accounting for about 10 percent of total land in Korea.
Baek et al. (2004) point out that the non-manufacturing sector is subject to more and stronger entry barriers compared with the manufacturing sector. See also OECD (2000) for a comparative study of regulatory barriers in retail trade services in a number of Asian countries.
The restrictiveness index scores range from 0 to 1, with 0 being least restrictive and 1 being most restrictive. For Korea, the index is 0.59 for retail services.
For natural greenbelt areas, ceilings of 20 percent for the building-to-land ratio and 100 percent for the volume-to-land ratio apply, which makes large-scale retail outlets unprofitable. The volume-to-land ratio refers the volume of all buildings divided by the entire area of development.
OECD (2005a) also cites industrial policies favoring exports and the manufacturing sector as having had a negative impact on the growth of the service sector.
The restrictiveness index for Korea’s accountancy services is 0.72, with 0 being least restrictive and 1 being most restrictive.
Foreign lawyers can set up branch offices, form joint ventures with Korean law firms, and employ Korean and foreign lawyers, but cannot establish their own law firms.
See Chapter IV for more details.
Chapter II elaborates on financial sector deregulation in Korea.
Min (2005) considers the three key service sectors with greatest potential to be business, cultural and tourism, and medical services.