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Kim, Sangho
Lim, Hyunjoon
Park, Donghyun
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ERD Working Paper Series 116
The paper empirically investigates the relationship between productivity and employment in Republic of Korea using structural vector autoregression (VAR) models. Productivity-enhancing technology shocks significantly increase hours worked, which lends support to the real business cycle theory. The results show that technology shocks can explain most elements of a business cycle both in the short and long run. On the other hand, demand shocks can only explain price fluctuations. The evidence thus suggests that Korean policymakers should give higher priority to supply-side policies that promote technological progress and innovation.
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Working Paper

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