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BOK Working Paper No.2020-10, The Role of Human Capital in Explaining Labor Productivity Growth in Korea since 2001

Economic Research Institute (82-2-759-5164) 2020.04.27 1941

Title : The Role of Human Capital in Explaining Labor Productivity Growth in Korea since 2001

Author : Hye Mi You(Hanyang University)

<Abstract>

This paper explores the role of human capital in explaining labor productivity growth in Korea between 2001 and 2018. To this aim, a Ben-Porath type human capital production function is estimated where human capital accumulates through both time spent in school and spending on educational goods. The estimation result shows that human capital in Korea increased by 1.07% per year over the sample period, 0.61%p of which is attributable to the increased educational expenditures. This human capital growth explains about 30% of the labor productivity growth. The result also implies that the downward trend in Korea’s labor productivity growth since 2001 is mainly due to a decline in both capital deepening and TFP growth rather than a stagnation in human capital growth.

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