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Transition to the Service Economy and Development Strategies for Regional Service Industries

Author Kim, Chun Kon et al. Date 2018.12.21 Page

The importance of the service industry is increasingly evident as the sector comes to account for an increasingly large share of production and employment in the national economy of Korea, which can now be confidently defined as “service economy”. As of 2017, the service sector accounts for nearly 60 percent of GDP and about 70 percent of employment. New services are becoming available and will expand following changes in the country’s demographic structure, income growth and technological development, particularly in information and communications technology (ICT). Taking into account these factors, the share and the influence of service industries in national economy is expected to keep growing in the future. 


There are also many claims that we should cultivate the high value-added service industry as a new economic growth engine, stimulating domestic demand and enhancing the vitality of the economy as a whole. The government has recognized the importance of the service industry and has put forth various policies for the development of the service industry. 


However, the government’s policies for the development of service industry focus on specific categories of the sector and do take regional characteristics into consideration. In addition, Korea’s service sector has too many small-sized businesses, low labor productivity and a domestic market-oriented structure, and imbalanced development of service industry from region to region due to concentration in the Seoul metropolitan area. 


The purpose of this study is to examine the impact of regional economies on the service economy and to explore the directions and development strategies of regional service industries in Korea. In suggesting the development strategies to strengthen competitiveness in regional service industries, we tried to consider the industrial characteristics of the region. 


First, we examined the current state of production and employment in regional service economies. We also examined changes in the service industry according to changes in the local population structure and prospective service in the future. We also analyzed the impact of regional service economies and aging populations on regional economies (production). We used statistical data from 15 metropolitan municipalities, counties, and districts excluding Seoul, including production data and demographics of 16 industries including 11 major service sectors to analyze the impact. 


To elucidate the development strategies of regional service industries, we have analyzed the keywords of development strategies and of promising services announced so far by the central government and by the local research institutes. We then suggested development strategies for local service industries through keyword network analysis.