The Korean Economic Forum
Total Factor Productivity and Tax Policy
Hag-Soo Kim (Korea Institute of Public Finance)Year 2019Vol. 11No. 4
AbstractAs the economy matures, Korea needs to make more policy efforts to achieveadditional innovative growth. This study reviewed the importance of theimprovement of TFP, which is the main growth driver of innovation-driveneconomies. It also reviewed that Korea did not improve it’s TFP since 2011. Italso analyzed the impact of major tax policies on the growth rate of TFP usingpanel data from OECD countries over the period of 1991~ 2016. According to theempirical analyses, the highest corporate tax rate that the current governmenthas raised right after its inauguration is expected to have a negative impact onimproving TFP. However, the tax reform plan of enhancing property taxcurrently being pushed will not negatively affect the overall productivityimprovement.