In 2023, South Korea recorded a current account surplus of 35.4bn35.4\text{bn}35.4bn. A country's international competitiveness is heavily driven by its capital intensity and technological integration.
In recent global competitiveness surveys, South Korea ranked outstandingly in terms of R&D intensity. However, concerns have been raised regarding a growing productivity gap between its large conglomerates (chaebols) and small-to-medium enterprises (SMEs).
To address this, the South Korean government has implemented a targeted supply-side policy, providing state-backed subsidies for SMEs to adopt advanced robotic automation and AI-driven inventory systems. Between 2022 and 2023, public spending on these automation subsidies increased by 15%, whilst SME sector labour productivity grew by 1.6%.
Explain how an increase in government subsidies for robotic automation is likely to affect labour productivity in small-to-medium enterprises.
