Does the Productivity J-curve Explain Korea’s Economic Slowdown?

This study examines the stagnation of total factor productivity (TFP) in the Korean economy through the lens of the “Productivity J-curve” hypothesis. Despite Korea’s world-leading R&D intensity and active investment in ICT and software, TFP growth has slowed since the 2000s. Using firm-level data of Korean listed companies, the micro-level analysis reveals that R&D and software investments are consistently associated with unobserved and complementary intangible assets. At the macro level, the revised TFP growth rate—adjusted for such intangible investments—exceeds the conventional measure by about one percentage point per year after 2008, demonstrating a typical J-curve effect. These findings suggest that measurement challenges and time lags in intangible investment contribute to Korea’s productivity puzzle, highlighting the need for improved intangible asset statistics and policies that foster complementary investments in human, organizational, and digital capital.