Regional convergence and efficiency in Korea

Abstract

This study evaluates regional convergence and efficiency among 13 regions in Korea over the period 1985-2002 using stochastic frontier production model which allows for regional inefficiency and heterogeneity. Evidence is found in favour of regional convergence in Korea, with a lower rate of convergence of around 2% a year, because we find that inefficiency in production does exist in regional economy. The results also indicate that the improvement of education and reforms of local government policies have contributed to an increased level of efficiency. Since the average estimates of technical efficiency have increased over time, the results show that regional economy has brought the significant improvement in efficiency.