Sources of Productivity Growth and Its Relation to the Distribution of Income in Industrialized Countries and Korea
Mun, Beung-Geun
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https://hdl.handle.net/2142/70783
Description
Title
Sources of Productivity Growth and Its Relation to the Distribution of Income in Industrialized Countries and Korea
Author(s)
Mun, Beung-Geun
Issue Date
1986
Department of Study
Economics
Discipline
Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, General
Abstract
Income growth and a more equitable distribution of income with the alleviation of poverty are the most important concern of the economists. So, the area of economic growth and income distribution has been drawing growing attention to many development economists and policy makers since the early 1960s.
However, there is no generalized theory on this field and a continuing debate goes on over the relationship between the economic growth and income distribution. Traditional theory on this topic maintains that economic growth and income distribution shows the inverted-U shape as a country develops, indicating that in the earlier stages of development income distribution worsens and only at later stages does it improve.
Is this Kuznets (1955) inverted-U hypothesis applicable to all the developing countries? The answer is no. This study provides the counter example of the Kuznets' path by systematically analyzing the sources of productivity growth and income distribution in a developing country and in industrialized countries.
Since the early 1960s, Korea and several East Asian countries have performed remarkable economic growth with less inequality by international standard. The Kuznets' path is not observed in these countries. What are the most important causes of this successful growth-cum-equity performance? The most important ingredients linking the rapid growth and relatively less unequal distribution of income are the broad-based educational expansion via increased investment in these and increases in employment opportunities with efficient utilization of these human capital in the production sector.
Accumulation of human capital, especially in primary and secondary levels, combined with net new physical capital investment, which embodies more recent technology and knowledge, operates to increase the labor productivity which, in turn, raises the real wages of those workers producing the output, hence more income. Increasing output also induces more human, physical, and knowledge capital investment. Thus, they are dynamically interrelated. The sustaining economic growth, which creates employment opportunities for the poor workers, is a crucial factor in the realization of more equitable distribution of income as well as of improving absolute poverty. The past experience of Korea shows that the Kuznets inverted-U path is avoidable if policies are well chosen. Growth and equity are not mutually exclusive, but they can be complementary.
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