Measurement of environmentally sensitive productivity growth in Korean industries

In this study we will attempt to measure productivity growth at the industrial level using the Metafrontier Malmquist-Luenberger (MML) productivity growth index and dissect/analyze this index to reveal further information. The results will be compared with those obtained from the conventional Malmquist-Luenberger (ML) productivity growth index. Utilizing the MML-index has two advantages when compared with the ML-index: the first is that it is able to consider undesirable output as a by-product of production; and the second is that it can account for producer group heterogeneities such as production technology. Noting such advantages, we will model this study to achieve three objectives related to productivity, technology and policy effects. To separate the results of the productivity index, we estimate the changes in the technological gap between regional and global frontier technologies. The proposed index presents productivity growth and dissects its components into 14 Korean industrial sectors from 1981 to 2010. For the purpose of detailed analysis, we have divided the relevant period into three decades. The results show that technology innovation can be regarded as an important component of productivity growth, rather than merely efficiency change. Chemical and petrochemical, iron and steel and machinery are all treated as global innovators throughout the entire period. It is also inferred that the groups with higher labor productivity obtain a higher productivity growth rate as compared with their low labor productivity counterparts. Considering the heterogeneity of production technology and the time that policy is introduced, the policy implications of the results will affect the circumstances regarding investment in environmental technology.