Gauging the Sources of Growth of High-Tech and Low-Tech Industries : The Case of Korean Manufacturing

Literature argues that the source of growth for high-tech industries emanates from technological progress, while that for low-tech industries comes from technical efficiency improvement. Also, some empirical studies have shown that technological progress is often accompanied by deterioration in technical efficiency. The focus in this study is to discuss a methodology and test the above two hypotheses with regard to Korean manufacturing data from 1970 to 1997. The study found that the 2.5 per cent average annual rate of technological progress during this period was the major contributor to total factor productivity (TFP) growth in Korean manufacturing whereas technical efficiency grew by a modest 1.1 per cent per annum. The analysis also showed that technological progress was responsible for TFP growth in both high-tech and low-tech industries and that both technological progress and technical efficiency improvement co-existed in the case of Korean manufacturing industries