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The expansion of the share of marginal firms and falling productivity

Author Kim, Wonkyu; Choe, Hyunkyung Date 2017.01.09 Issue No 2

The Korean economy has been facing a challenge of a productivity diminution since the beginning of the 2010s.
-During 2011~2015, the increase of total factor productivity, which stands for innovation and efficiency of a total economy, slowed down great amount compared to that of the 2000s, and it is expected to continue to do so until the end of the 2010s.


In terms of each industry, 21 industries among 41 decreased in total factor productivity during 2011~2014.
-The share of marginal firms jumped from 9.4% in 2011 to 12.7% in 2015. During the same period, the share of marginal firms increased in 32 industries among 41.


Above all, chemical products, (except for medicines), primary metal products, and other transportation equipments including weak industry in the second half of 2015 decreased significantly in productivity.


1 % point increase of the weighted share of marginal firms leads to 0.23% decrease in total factor productivity.


Based on these results of actual proof analysis and two cases of successful structural reforms in the early of the 1980s and the end of the 1990s, corporate structural reforms are essential challenges for the current Korean economy.
-However, efforts need to be stepped up to help make corporate structural reforms be an opportunity to strengthen the industry’s competitiveness. ?