Demographic Change, Human Capital, and Economic Growth in Korea

In this study, we construct a measure of human capital using micro datasets on labor
composition of age, gender, education, and wage rate and analyze its role in economic
growth for the Korean economy. Over the past three decades, human capital has grown
steadily at about 1% per year, contrasting to a continuously declining trend of total workhours.
This growth has been driven by the rise of better-educated baby boom cohorts. A
growth accounting exercise shows that human capital contributes significantly to
economic growth; it accounted for 0.5% 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. Polices to improve human capital of less-productivity workers will help to
support aggregate human capital and economic growth.