Measuring the Impact of Human Capital on the Economic Growth of South Korea

The aim of this paper is to measure total factor productivity (TFP) growth in Korea without taking into account quality differences in the labor factor. Therefore, assuming that Lucas (1988) theory of endogenous growth is correct, the standard TFP measure will be overestimated and will include the contribution of human capital to economic growth. Hence, regressing the TFP growth against a proxy of human capital (average years of schooling) will estimate the impact of education on the economic growth of Korea. The main result of the study shows that between 1980 and 2004 the Korean economy grew at an annual rate of 6.7% and human capital accumulation accounted for 1.3 percentage points of that rate.