Establishment Dynamics and Productivity: Is the ICT Industry Improving?

The Korean ICT industry has recently experienced low productivity growth. This study examines this decline of labor productivity growth using the perspective of establishment dynamics. The establishment dataset covering one or more employees shows that the ICT industry has higher entry and exit rates than the other sectors. However, active reallocation in the ICT industry has slowed and the contribution of entrants to productivity growth has rapidly declined, especially in its service sector. Results show that the slowdown of establishment dynamics is related to the decline in productivity growth in the ICT industry.