The Korean Journal of Economic Studies
Regional Heterogeneity and Productivity Gap across Regions in Korea: An Empirical Analysis Using Endogenous Growth Models
Seewon Kim (Chonnam National University) and Jieun Kim (Bank of Korea)Year 2023Vol. 71No. 4
AbstractAvailable data indicates that the regional economies of Korea are heterogeneous in industry structure, R&D resources, and human capital. The regional heterogeneity implies that a substantial part of technological progress may be region-specific. Based on this argument, this study estimates a regional technology production function and evaluates the TFP gap across regions. First, the estimation result presents evidence in favor of R&D-based endogenous growth models against the neoclassical growth model. This implies that technological progress is proportional to an increase in R&D inputs. Second, we examine human capital models of the technology production function. The estimation result indicates that technological progress is associated with the level of human capital, but not a change in human capital, as predicted by the Romer model. The current result implies that regions such as Seoul, with more R&D resources and human capital, may have a comparative advantage in technological innovation. Consequently, the income gap between these regions and others may widen in the future.