​Distinguished Seminar by Economic Growth Centre | Demographic Change, Human Capital, and Economic Growth in the Republic of Korea

In this study, we construct a measure of human capital for the Republic of Korea using micro datasets on labor composition of age, gender, education, skill and wage rate. Over the past three decades, human capital has grown steadily at about 1% per year, contrasting to a continuously declining trend of total work-hours. This growth has been driven by the rise of better-educated and skilled baby boom cohorts. A growth accounting exercise shows that human capital contributes significantly to economic growth; it accounted for 0.8% points of annual GDP growth over the period. Human capital is projected to remain a major growth factor over the next two decades as the increase in educational attainment continues. Increased employment rate of elderly or female workers reduces the aggregate human capital growth while increasing the available labor. On the other hand, improving cognitive skills can contribute significantly to human capital growth.