This study is aimed at proposing roles and directions of the ICT industry for sustainable economic growth by empirically analyzing the relationship between economic growth and ICT industry which has led economic growth of Korea. Chapter 3 examined causal relationships between the ICT R&D investment ...
This study is aimed at proposing roles and directions of the ICT industry for sustainable economic growth by empirically analyzing the relationship between economic growth and ICT industry which has led economic growth of Korea. Chapter 3 examined causal relationships between the ICT R&D investment and economic growth using a vector error correction model, then chapter 4 estimated economic effect of the ICT R&D investment on economic growth by using a Principal Component Regression Analysis. Finally, chapter 5 examined structural changes and growth factors within the ICT industry by using Input-Output Structural Decomposition Analysis to proposing roles and directions of ICT industry for sustainable growth of Korean economy. Summarized results of this study is as follows. First, according to the causality analysis between ICT R&D investment and economic growth in chapter 3, bidirectional Granger-causality was found between Korea’s ICT R&D investment and economic growth. Specifically, long run causality was observed from ICT R&D investment to economic growth, and short run causality from economic growth to ICT R&D investment. When ICT R&D investment was classified into public and private sectors, short run causality was observed from public ICT R&D investment to private ICT R&D investment, and long run causality from private ICT R&D investment to public ICT R&D investment. The establishment of bidirectional causality between ICT R&D investment and economic growth implies that ICT R&D investment is driven by economic growth and vice versa. In addition, the establishment of two-way Granger-causality between public ICT R&D investment and private ICT R&D investment indicates a virtuous cycle has taken hold. Second, according to the results of an empirical analysis for estimating economic effect of the ICT R&D investment on economic growth in chapter 4, a 1% increase in R&D stock in the ICT industry was found to lead to a 0.27% rise in value added. To compare the influence of production factors in creating value added, the standardization coefficient was examined. That of R&D stock was 0.380 and it was the second most influential factor in creating value added, following closely behind capital stock. This results show that R&D investment in the ICT industry has a highly positive impact on economic growth in Korea. Thus, it is considered that active R&D investment in promising fields will contribute to establishing a virtuous cycle of improved productivity and expanded employment in the ICT industry. Additionally, it is expected that the expansion of ICT R&D investments of industries which are ongoing a convergence with ICT industry such as medicine, finance, shipbuilding, energy, and automobile will enable demand-based innovation and accelerate new production and employment in the respective fields. Third, according to the results of the structural change analysis in chapter 5, the ICT manufacturing field exhibited a deepening of the so-called jobless growth phenomenon. Although the output of the ICT manufacturing field grew dramatically, employment consistently decreased. In contrast, the ICT service field began to show a problem with reduced labor productivity. Although the ICT service field’s output experienced a slowdown in growth, employment experienced an exponential increase. The jobless growth of the ICT manufacturing field and the reduced labor productivity in the ICT service field may be directly linked not only to reduced industrial competitiveness in the ICT industry but also to decreasing national competitiveness. Considering that Korea has the highest ICT infrastructure in the world, it is expected that the convergence of ICT and other industries will lead each industry to expand its investment in ICT, improve labor productivity, establish a virtuous cycle of ‘increased production’ and ‘increased employment’, and eventually contribute to an enhancement of Korea’s national competitiveness. And the results of the growth factor analysis by using I-O SDA, the ICT industry’s growth was fueled by export expansion, followed by consumption expansion, technological change, inventory expansion and investment expansion. However, given that Korean conglomerates were rapidly increasing overseas production and that innovation in the ICT industry has led to a greater contribution in terms of technological change, it is difficult to expect that export expansion could be improved in the future. Import substitution of intermediate goods and end goods, meanwhile, had negative effects on the ICT industry’s growth. This appears to be because there are structural limitations to the ICT industry in Korea in which raw materials and intermediate goods are usually imported for processing before exportation. In the industrial sector, the electronic component sector and broadcasting and telecommunication equipment sector experienced marked growth, and the electronic component sector scored the greatest contribution. Furthermore, in spite of the rapid growth in other ICT manufacturing sectors, the information equipment sector sank into stagnation, and the contribution of the ICT service sector was constantly decreasing. Accordingly, to achieve sustainable growth in the ICT manufacturing field, an emphasis needs to be placed on establishing policies to promote exports for the sustainable development of the ICT manufacturing field, and the strategic technical development of intermediate goods through selection and concentration should also be conducted at the same time. Additionally, to achieve sustainable growth in the ICT service fields, new ICT service demand based on cutting edge ICT such as Cloud, Big data analysis and the Internet of Things needs to be created through bold R&D investment.
This study is aimed at proposing roles and directions of the ICT industry for sustainable economic growth by empirically analyzing the relationship between economic growth and ICT industry which has led economic growth of Korea. Chapter 3 examined causal relationships between the ICT R&D investment and economic growth using a vector error correction model, then chapter 4 estimated economic effect of the ICT R&D investment on economic growth by using a Principal Component Regression Analysis. Finally, chapter 5 examined structural changes and growth factors within the ICT industry by using Input-Output Structural Decomposition Analysis to proposing roles and directions of ICT industry for sustainable growth of Korean economy. Summarized results of this study is as follows. First, according to the causality analysis between ICT R&D investment and economic growth in chapter 3, bidirectional Granger-causality was found between Korea’s ICT R&D investment and economic growth. Specifically, long run causality was observed from ICT R&D investment to economic growth, and short run causality from economic growth to ICT R&D investment. When ICT R&D investment was classified into public and private sectors, short run causality was observed from public ICT R&D investment to private ICT R&D investment, and long run causality from private ICT R&D investment to public ICT R&D investment. The establishment of bidirectional causality between ICT R&D investment and economic growth implies that ICT R&D investment is driven by economic growth and vice versa. In addition, the establishment of two-way Granger-causality between public ICT R&D investment and private ICT R&D investment indicates a virtuous cycle has taken hold. Second, according to the results of an empirical analysis for estimating economic effect of the ICT R&D investment on economic growth in chapter 4, a 1% increase in R&D stock in the ICT industry was found to lead to a 0.27% rise in value added. To compare the influence of production factors in creating value added, the standardization coefficient was examined. That of R&D stock was 0.380 and it was the second most influential factor in creating value added, following closely behind capital stock. This results show that R&D investment in the ICT industry has a highly positive impact on economic growth in Korea. Thus, it is considered that active R&D investment in promising fields will contribute to establishing a virtuous cycle of improved productivity and expanded employment in the ICT industry. Additionally, it is expected that the expansion of ICT R&D investments of industries which are ongoing a convergence with ICT industry such as medicine, finance, shipbuilding, energy, and automobile will enable demand-based innovation and accelerate new production and employment in the respective fields. Third, according to the results of the structural change analysis in chapter 5, the ICT manufacturing field exhibited a deepening of the so-called jobless growth phenomenon. Although the output of the ICT manufacturing field grew dramatically, employment consistently decreased. In contrast, the ICT service field began to show a problem with reduced labor productivity. Although the ICT service field’s output experienced a slowdown in growth, employment experienced an exponential increase. The jobless growth of the ICT manufacturing field and the reduced labor productivity in the ICT service field may be directly linked not only to reduced industrial competitiveness in the ICT industry but also to decreasing national competitiveness. Considering that Korea has the highest ICT infrastructure in the world, it is expected that the convergence of ICT and other industries will lead each industry to expand its investment in ICT, improve labor productivity, establish a virtuous cycle of ‘increased production’ and ‘increased employment’, and eventually contribute to an enhancement of Korea’s national competitiveness. And the results of the growth factor analysis by using I-O SDA, the ICT industry’s growth was fueled by export expansion, followed by consumption expansion, technological change, inventory expansion and investment expansion. However, given that Korean conglomerates were rapidly increasing overseas production and that innovation in the ICT industry has led to a greater contribution in terms of technological change, it is difficult to expect that export expansion could be improved in the future. Import substitution of intermediate goods and end goods, meanwhile, had negative effects on the ICT industry’s growth. This appears to be because there are structural limitations to the ICT industry in Korea in which raw materials and intermediate goods are usually imported for processing before exportation. In the industrial sector, the electronic component sector and broadcasting and telecommunication equipment sector experienced marked growth, and the electronic component sector scored the greatest contribution. Furthermore, in spite of the rapid growth in other ICT manufacturing sectors, the information equipment sector sank into stagnation, and the contribution of the ICT service sector was constantly decreasing. Accordingly, to achieve sustainable growth in the ICT manufacturing field, an emphasis needs to be placed on establishing policies to promote exports for the sustainable development of the ICT manufacturing field, and the strategic technical development of intermediate goods through selection and concentration should also be conducted at the same time. Additionally, to achieve sustainable growth in the ICT service fields, new ICT service demand based on cutting edge ICT such as Cloud, Big data analysis and the Internet of Things needs to be created through bold R&D investment.
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