Endogenous growth: Contributions of education to economic development in Korea and policy implications
Jang, Chang Won
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Permalink
https://hdl.handle.net/2142/21027
Description
Title
Endogenous growth: Contributions of education to economic development in Korea and policy implications
Author(s)
Jang, Chang Won
Issue Date
1995
Doctoral Committee Chair(s)
McMahon, Walter W.
Department of Study
Economics
Discipline
Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, General
Economics, Labor
Education, Technology of
Language
eng
Abstract
The central focus of this research is to explore the role of human capital as a source of economic growth in Korea. This paper considers the relation of education to per-capita growth in the medium term in seven East-Asian countries. This includes in addition to basic education the relation of higher education via secondary education and R&D capital, and the relation of technology developed through R&D via higher and secondary education, especially to per-capita growth in Korea. This thesis focuses on the returns to investment in education using both the marginal product of each educational level in the production function and the relation of these to the social rate of return based on microeconomic earnings data. It specifies a production function in using a total capital approach that includes physical, human, and knowledge capital formation as well as unimproved raw labor.
The results show that 65 percent of the total predicted per-capita growth in Korea since 1965 is due to expanded secondary school enrollments. Primary education comes second with 36.2 percent, followed by higher education, at 4.7 percent, while physical investment contributes 24.9 percent and raw unimproved labor contributes only 6.6 percent in Korea.
"Empirical estimation of the rates of return to educational investment in Korea are suggested as labor market signals produced by monitoring labor force activity and the movement of wages and employment for workers with specific levels of schooling and in training programs. Single quantified ""manpower requirements"" planning seeks to be replaced by greater reliance on these labor market signals augmented with measures of unemployment, underemployment, job search time, and tracer studies all of which also reflect efficiency. Second, the rationalization of the public sector's investment in schooling and training requires the examination of a broad array of labor market imperfections and failures, private training capacity, and structural changes involving strategic skills that require long lead times for acquisition."
Key conclusions are that the productivity of education is of prime importance to per capita growth. The model also includes endogenous technological change which together with human capital formation leads to increasing returns to scale. These effects of education on per capita growth are seen in three ways: (1) through the effects of increased educational attainment as the labor force increases its skills and hence its productivity, (2) through the contribution of investment in higher education to the conduct of R&D, and the training of R&D personnel for firms as part of endogenous technical change, and (3) through the ability to transfer technology from more advanced countries, as well as to learn and adapt these new technologies while on the job.
Second, in the absence of accurate means of forecasting manpower needs, the expected rates of return (and other related market signals) provide a useful and available flow of current market information relevant to achieving greater allocation efficiency. These rates of return, and related market signals therefore, are also useful empirical guides to educational choices which are conducive to individual and national efficiency, and hence to endogenous economic growth.
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