Exploring the Causes and Remedies of Japanization
Edited by Dongchul Cho, Takatoshi Ito and Andrew Mason
Chapter 6: Misallocation in the manufacturing sector of Korea: a micro data analysis
This study evaluates the allocative efficiency in the Korean manufacturing sector following the methodology of Hsieh and Klenow. Overall allocative efficiency has declined from 1990 to 2012. The potential loss from worsening misallocation is estimated at 0.6 percentage point each year, which is considerable in terms of overall total factor productivity. In terms of firm size distribution, large establishments are more likely to expand initially, if distortions are removed in most countries. One notable feature in Korea is that this pattern is pronounced.
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