A decomposition of total factor productivity growth in Korean manufacturing industries: A stochastic frontier approach

This paper applies a stochastic frontier production model to Korean manufac turing industries, to decompose the sources of total factor productivity (T FP) growth into technical progress, changes in technical efficiency, change s in allocative efficiency, and scale effects. Empirical results based on d ata from 1980-1994 show that productivity growth was driven mainly by techn ical progress, that changes in technical efficiency had a significant posit ive effect, and that allocative efficiency had a negative effect. This stud y suggests that specific guidelines are required to promote productivity in each industry, and provides additional insight into understanding the rece nt debate on TFP growth in Korean manufacturing.