Hyunbae Chun

Information Technology and the Demand for Educated Workers: Disentangling the Impacts of Adoption Versus Use

This paper examines the effect of information technology (IT) on the relative demand for educated workers in U.S. industries from 1960 to 1996. After decomposing this effect into IT use and adoption, I find that the use of IT is complementary with educated workers, and that educated workers have a comparative advantage in the adoption of IT. In total, IT use and adoption effects account for almost 40 of the acceleration in demand for educated workers since 1970. Moreover, the adoption of IT explains about one-third of the total IT effect on the acceleration in skill upgrading in the 1970s.

An instrumental variable estimate of the effect of fertility on the labour force participation of married women

This study estimates the effect of fertility on the labour force participation of married women in Korea. Since Korean households prefer sons to daughters, there is exogenous variation in the number of children among households, depending on their first childs sex. Using this exogenous variation as an instrumental variable for fertility, it is found that having children reduces the labour force participation of married Korean women by 27.5%.

Productivity growth and stock returns: firm- and aggregate-level analyses

A firm’s stock return is affected not only by its own productivity growth rate, but also by other firms’ productivity growth rates. We show that this spillover effect is significant and time-varying, and underlies a fallacy of composition observed in late 20th century U.S. data: stock returns and productivity growth are correlated positively in firm-level data but negatively in aggregate data. This seeming fallacy of composition reflects Schumpeterian creative destruction: a few technology winners’ stocks rise with their rising productivity while many technology losers’ stocks fall with their declining productivity. Thus, most individual firms’ stock returns correlate negatively with aggregate productivity growth. This implies that technological innovation need not be a blessing for all firms and as a result, for investors holding the market. Our findings also provide a firm-level technology innovation-based explanation of prior findings that the market return correlates negatively with aggregate earnings.

Substitutability and Accumulation of Information Technology Capital in U.S. Industries

The substitution toward information technology (IT) capital fueled by the rapid decline in IT prices is regarded as an important source of U.S. economic growth. Using data on 41 U.S. industries for the period from 1984 to 1999, this article examines the degree of substitutability between IT capital and other inputs and quantifies the contribution of IT substitution to the accumulation of IT capital per hour worked. Estimates of various elasticities of substitution indicate that IT capital and other factors of production are substitutes. In particular, the substitution of IT capital for other inputs is salient in the industries with less IT capital. Among the sources of IT capital deepening, IT substitution accounts for about 60% of growth in IT capital per hour worked.

Innovative activities of an incumbent and a potential entrant: an empirical exploration of the role of uncertainty in product and process innovations

By distinguishing between product and process innovations, we empirically examine how uncertainty affects the innovation activities of incumbents and potential entrants. We find that potential entrants are more innovative than incumbents in both process and product innovations, which supports the patent race model. Furthermore, we find that uncertainty plays a crucial role in hindering an incumbents incentive for product innovation, but has little impact on the innovation activities of both incumbents and entrants with respect to process innovation. The results suggest that a higher uncertainty in product innovation can raise the incentive for incumbent firms to seek for cooperation with new entrants.

Job Creation and Destruction: New Evidence on the Role of Small Versus Young Firms In Korea

Using the Census on Establishments data in Korea, the present study revisits the role of firm age and size to explain aggregate employment dynamics. We confirm the finding of Haltiwanger et al. that no systematic inverse relationship exists between net job growth and firm size once firm age is controlled for. We find that small businesses are driving forces of aggregate employment growth but that such high growth is mostly driven by the entry of very small firms, which is offset by job destructions of a similar magnitude. Moreover, entrepreneurial activity occurs among very small firms, whereas large start-ups are rarely observed.

Cross-border Vertical Integration and Intra-firm Trade: New Evidence from Korean and Japanese Firm-level Data

This paper establishes two facts about cross-border vertical integration and intra-firm trade of firms in Korean and Japanese manufacturing industries. First, the intra-firm trade between a parent firm and its affiliates is highly concentrated in a small number of large multinational corporations. Second, the input–output coefficient between the parent firms industry and the affiliates industry is weakly related to the presence and magnitude of intra-firm trade between the parent firm and its affiliates. Furthermore, these two characteristics are also found in domestic vertically integrated firms. In particular, the second point identifies a need for further research on the motivation of cross-border vertical integration between two manufacturers, the final good producers at home and the input suppliers abroad.

Intangible Investment and Changing Sources of Growth in Korea

We examine how intangible investments change the sources of growth in the Korean economy. After constructing a novel industry-level data set on intangibles, we estimate the contribution of intangible-intensive industries and other industries to aggregate productivity growth in 1981–2008. The contribution of intangible-intensive industries to aggregate labour productivity growth has significantly increased, whereas that of other industries has substantially decreased. The increased contribution of intangible-intensive industries is mainly associated with total factor productivity growth rather than with input growth. This suggests that innovations related to intangible investments in these industries might become a new key source of productivity growth in Korea.

Capital allocation, stock return volatility and productivity growth in US industries

Using firm-level Compustat data from 1971 to 2000, we report a substantial cross-industry variation of allocative efficiency in capital expenditure in the US economy. Industries with higher allocative efficiency are the ones with higher firm-level value-added growth heterogeneity, higher information transparency captured by firm-specific stock return volatility and faster long-run productivity growth. This finding is consistent with the idea of creative destruction, where a well-functioning market mechanism sharply distinguishes winners from losers and thus enhances economic growth in the long run. Allocative efficiency has a substantial economic significance and explains as much as 24.5% of the difference in long-run industry productivity growth.