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. AbstractIn 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 work-hours. 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.

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This study explores the major driving forces behind the dynamic pattern of the college wage premium in Korea since the 1980s, using the demand and supply framework. We find that movements in the college wage premium are mainly explained by expansion of the relative supply of college graduates and an increase in the relative demand for high‐skilled labour due to trade with China. We also find that the substitutability in Korea between college and non‐college‐educated workers is higher, with an elasticity of approximately 3.5–4.1 than that in advanced economies. The counterfactual analyses demonstrate that with a lower substitution elasticity or smaller trade volume with China, Korea might have witnessed a sharp decline in the college wage premium.

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