Articles

Articles

Regional Heterogeneity and Productivity Gap across Regions in Korea: An Empirical Analysis Using Endogenous Growth Models
  • Author
    Seewon Kim (Chonnam National University) and Jieun Kim (Bank of Korea)
  • Year
    2023
  • Volume
    Vol.71
  • Number
    No.4
  • Available data indicates that the regional economies of Korea are heterogeneous in industry structure, R&D resources, and human capital. The regional heterogeneity implies that a substantial part of technological progress may be region-specific. Based on this argument, this study estimates a regional technology production function and evaluates the TFP gap across regions. First, the estimation result presents evidence in favor of R&D-based endogenous growth models against the neoclassical growth model. This implies that technological progress is proportional to an increase in R&D inputs. Second, we examine human capital models of the technology production function. The estimation result indicates that technological progress is associated with the level of human capital, but not a change in human capital, as predicted by the Romer model. The current result implies that regions such as Seoul, with more R&D resources and human capital, may have a comparative advantage in technological innovation. Consequently, the income gap between these regions and others may widen in the future. 
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