Effect of Regulation on Labor Productivity: Empirical Analysis Using a Panel of Korean Industries (in Korean)

We measure a regulatory stringency index across Korean industries and analyze the effects of regulation on labor productivity through the test and estimation of panel cointegration. Panel cointegration test shows that there exists a statistically significant cointegration among labor productivity, per capita physical capital stock, per capita R&D capital stock, and regulatory stringency index. Furthermore, the estimation of panel cointegration vector shows that, when the regulatory stringency index is classified by the characteristics of regulation (i.e., economic, social, and administrative), the economic regulatory stringency has significantly negative impacts on labor productivity while the social regulatory stringency does not affect productivity significantly. The empirical evidence implies that alleviating economic regulation rather than social regulation is more likely to be effective in enhancing labor productivity in Korea.