IMF Working Papers

Productivity and Product Markets in Korea: Evidence from Advanced Economies

By Andrew J Swiston, Stella Tam

October 28, 2022

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Andrew J Swiston, and Stella Tam. "Productivity and Product Markets in Korea: Evidence from Advanced Economies", IMF Working Papers 2022, 213 (2022), accessed November 9, 2025, https://doi.org/10.5089/9798400224065.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper constructs an industry-level dataset of productivity across advanced economies, showing that Korea’s labor productivity and total factor productivity levels are below the median of other advanced economies. We identify sizable industry-level productivity gaps in Korea with respect to the global frontier, especially in market-oriented services. Using the OECD’s Product Market Regulation (PMR) Indicators, we show that tighter PMRs slow industry-level productivity growth, and these effects occur across all areas of PMRs—state control, barriers to entrepreneurship, and barriers to trade and investment—and through several detailed indicators. These effects are transmitted through higher product prices and unit labor costs of industries exposed to regulation. The results confirm the potential for Korea to boost overall productivity and growth through PMR reforms, especially by lowering barriers in service and network sectors, reducing restrictions applying to trade and investment, and evaluating the scope of government involvement in the economy.

Subject: Commodity markets, Financial markets, International trade, Labor productivity, Production, Productivity, Total factor productivity, Trade barriers

Keywords: Commodity markets, Global, Growth, IMF Product Market Regulation, Korea, Labor productivity, Labor productivity distribution, OECD PMR indicators structure, OECD product market regulation, PMR indicator, Product markets, Productivity, Productivity comparison, Productivity measurement, Regulation, Regulation-productivity linkage, Total factor productivity, Trade barriers

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