Knowledge Production Function in South Korea : An Empirical Analysis

In this paper we estimate knowledge production function for 15 South Korean industry sectors using panel data. To accommodate the influence of inter-sectoral interactions on the creation of knowledge, we estimated parameters for related knowledge production functions using the Dynamic Seemingly Unrelated Regression (DSUR) model proposed by Mark et al. (2005). We found the elasticity of knowledge production with respect to the size of research staff to be 0.25 and that with respect to the existing stock of knowledge to be 0.353. The fact that the elasticity of new knowledge creation with regard to the existing knowledge stock is below 1 in South Korea corroborates the view that the rate of long-term growth of its economy is chiefly determined by elasticities related to production functions of goods and services and the rate of population growth, and that its government, to ensure a continued growth for the Korean economy, must shift the focus of R&D policies from the current direct intervention-centered model to one consisting of indirect measures, namely supporting knowledge management and diffusion and the creation of a knowledge sharing system. Keywords—Knowledge-based economic growth, knowledge production function, cointegrated coefficient, DSUR, R&D policy.