Human capital and economic growth
Amezcua Bautista, Laura Natali
Hankuk University of Foreign Studies. Graduate School
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HUMAN CAPITAL AND ECONOMIC GROWTH: THE CASE OF KOREA According to the World Bank report, in 2012 South Korea had a Gross Domestic Product of 1,129,598 millions of current US dollars which positions it in the 14th place in the world's largest economies. Many academics and policymakers have called to this reality “miracle”. This is because after the independence from Japan in 1945, and the Korean War from 1950-1953; South Korea was counted among the poorest countries around the world. Nevertheless, the backwardness and poverty was left behind in a very prompt period faster than any other country could do in the history of the world. The “miracle” was achieved not only by Korea. East Asian countries had a remarkable of high and sustained growth. From 1969 to 1990 the twenty-three economies of East Asia grew faster than all other regions of the world. Most of this achievement is attributable to seemingly miraculous growth in just eight economies: Japan; the “Four Tigers” (Hong Kong, the Republic of Korea, Singapore and Taiwan), China, and the three newly “Industrializing Economies” (NIEs) of Southeast Asia: Indonesia, Malaysia and Thailand. These eight High Performing Asian Economies (HPAEs) were the subject of the World Bank study in 1993 named “The East Asian Miracle”. A natural question that should follow is what caused East Asia's success? To this question the World Bank report mentions that private domestic investment and rapidly growth in human capital were the principal engines of growth. What deserves interest is that, among all these NIEs, Korea is unique in that it has achieved not only economic, but at the same time drastic social and political development as well. Many factors have enabled South Korea's rapid change. Key amongst these was the building of an information infrastructure and harnessing the potential of science and technology. For this, SaKong and Koh (2010) summarize the transformation of the Korean economy in two words: industrialization and globalization. During the 90's, scholars as Alwyn Young (1994) argued that the role played by factor accumulation was fundamental in explaining the extraordinary postwar growth of Hong Kong, Singapore, South Korea and Taiwan. Labor force participation rates, educational levels and (with the exception of Hong Kong) investment rates have risen rapidly in all four economies. In a similar vein, Paul Krugman (1994) on his part stated that growth in East Asia from 1965 to 1990 had been mostly the result of capital accumulation, while efficiency or productivity gains had played a minimal role. Among all the possible contributions to the growth of Korea, we share one of the most important conclusions of the World Bank report, that states that “Education is the main theme of the story of the differences in growth between Sub-Saharan Africa and the East Asian high performers” (World Bank, 1993). The experience of South Korea strongly suggests that thanks to the investment in education, they learned how to leverage their abilities to the use of technology and knowledge to become now only after sixty years, in the 14th largest economy in the world, even without natural resources but with the only one abundant resource South Korea has: the human capital. This is how the specific case of South Korea has been considered a good example to follow for developing economies. Especially considering that the only resource in abundance that Korea had since the beginning was its labor. For that, it is possible to infer that in the "Korean Miracle", Korean people have played a fundamental role. Nonetheless, the main objective of the present work is to examine the importance of investing in human capital, mostly in terms of education as the main engine of growth in South Korea because, if this proves to be true; the public policies implemented, the quality of institutions, the high foreign investments rates, and many other factors were successful only because they found a fertile ground on the high level of knowledge that Korean human capital had. Currently, Korea is recognized worldwide as one of the leading producers of technology due to a knowledge-based economy achieved by a large investment in education, science and technology. This makes the question object of this research to arise: is the tertiary level of education the one that more deeply contributes to the good performance of the Korean knowledge-based economy? Thus, the effects of education in the Korean economic growth from 1960 to the present were this study´s central focus.