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GTAP Resource #3336

"How can Korea Raise its Future Potential Growth Rate?"
by Ianchovichina, Elena

Korea has achieved tremendous economic progress over the last three and a half decades, but in recent years growth has slowed down, and looking forward, most forecasters expect potential growth to decline substantially. How can Korea avoid this decline and improve its growth prospects? We provide answers to these questions by analyzing the key factors determining potential growth in Korea using a production function methodology and conducting simulations tracing the path of potential growth to 2050 under different scenarios. Our analysis suggests that only if Korea implements swift reforms to address the low productivity of its service sector and prevent the decline in its labor supply, by boosting in particular female participation rates, can the Korean economy achieve a doubling of its per capita income level by 2020. Without a rapid response this goal will be unachievable and the expected growth slowdown will be unavoidable. The paper discusses reforms intended to boost productivity in services, and labor force participation and estimates that those could Korea sustain growth at double its expected real growth rate in the business-as-usual scenario in the period 2020-2040.

Resource Details (Export Citation) GTAP Keywords
Category: GTAP Application
Status: Published
By/In: World Economics
Date: 2008
Created: Ianchovichina, E. (4/15/2010)
Updated: Batta, G. (4/19/2010)
Visits: 1,388
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