Production function and technological progress play a crucial role in the modern theory of economic growth. Technological Progress has been thought as an essential factor of underlying forces of the economic growth. Hicks classified technological progress as labor-saving, neutral, capital-saving. According to Hicksian definition, technological progress is labor-saving if, at a given capital-labor ratio, it increases the ratio of the marginal product of capital to that of labor and it is capital-saving if it decreases the ratio. There have been numerous studies on the estimation of technological progress using production functions. The usual assumption in these studies is that technological progress is either Hicks-neutral of Harrod-neutral. However there is no reason a priority for this asumption.
The purpose of this study are to estimate the extent and the type of technological progress and to analyse the contribution of the technological progress on the growth of output in the Korean manufacturing during the period 1963 - 1983, using the production function with factor-augmenting technological progress as follows, Y = F ( A(t)K , B(t)L ).
The results of this study are as follows.
First, the type of technological progress in Korean manufacturing is labor-saving in the Hicksian sense.
Second, increases in the capital stock explain approximately 51 % of the growth of output and increases in labor account for 26 % of the growth of output. The remaining 23 % is attributed to technological progress of which 7 % is due to the increase in capital efficiency and 16 % is due to the increase in labor efficiency.
Since the portion of output growth due to technological progress in Korean manufacturing is smaller than developed countries, the government and enterprises should make efforts to enhance a technological level.
