South Korea is regarded as the 14th largest economy in the world with a nominal GDP of $1.449 trillion. The main industries are electronics, telecommunications, automobile production, chemicals, shipbuilding, and steel, as Korea has few natural resources. They however, are the 7th largest exporter in the world and have therefore adopted an export-driven economy.
The amount of development and economic equality within a nation is helpful when evaluating and predicting the future economic growth because of the strong correlation between these factors. There was only 16% of the population living below the poverty line in 2009 and an unemployment rate of 3%. The gini coefficient is used for estimating the distribution of wealth within a nation. It measures the cumulative share of income that is earned by the cumulative percentage of people from the lowest to the highest income brackets. On a scale of 0 to 100, with 100 indicating that one single person has the entire share of the nation’s income. The gini coefficient in Korea is 31.0, which indicates there is a fair degree of wealth equality.
As shown in the graph, the total factor productivity index has increased since 2009. Total factor productivity seeks to quantify the degree of productivity within the aggregate economy, and it has been shown to be a accurate predictor of economic growth. The 2nd graph shows that during this same period, GDP growth has consistently been positive although there was a dip in the GDP growth rate in 2009. Since 2009 there has been a steady rise in both GDP and total factor productivity, two of the main criterion for predicting future economic growth.
One Comment
I’ve not been able to find how the TFP index is calculated; I’m suspicious that it is flat over a multi-year time span, not just for Korea but for several other countries, but we are in an era of volatile macroeconomic performance, so maybe “no change” really is what’s going on.
In any case Korea was able to go through the 2009-10 period without an outright fall in GDP; being next door to China helped. Not so long ago the US was Korea’s dominant trading partner, so when we caught a cold, Korea caught pneumonia. No longer: Korea’s is very much an Asian economy, tied to China, Japan and Southeast Asia. This is a fascinating change, because for all the talk of a multilateral world, until recently intra-Asia trade flows were modest.
Now, is Korea export dependent? As a small economy, comparative advantage suggests they ought to have high levels of both imports and exports (think of Virginia’s economy, lots of exports and lots of imports from the rest of the US — but [and I’ve looked but don’t know where to find it] California as a far larger place ought to be more self-contained). So we can look at Y = C + I + G + X – M and as whether change in (X – M) net trade is ship that moves the economy. It may be the main source of volatility in GDP, and over some time periods it may have been a dominant source of growth. The latter however requires a continuous increase in net trade, and that’s not likely to go on for decade on end.
Comments are closed.