Abstract
South Korea is a case of impressive economic growth: a previously underdeveloped country that, after the 1960s, embarked on a process to achieve development before other underdeveloped countries. South Korea is also a case where innovation processes move from imitation to self-creation thanks to a quick updating or “catching up” process. South Korea’s journey from underdevelopment to development has sparked a rich and well-founded debate within economic theory. These debates weigh the roles of productive factors (Physical, Human, Social, and Financial Capital, Labor, resources, environment), economic agents (State, Firms, Banks), and international trade factors (FDI, Imports, Exports) on its growth process. The central argument of this article establishes that Capital is the central variable that explains the successful outcome of the Korean growth miracle. However, Capital composition is even more important. The impact of Human Capital on the growth process evinces a synergy with Knowledge development. We modify the Solow model using Human, Physical Capital, and Total Factor Productivity as independent variables in a Multivariable Regression Model for the period between 1960 and 1979 on Output per worker. We conclude that Human Capital and Productivity are just as important as Physical Capital for explaining growth per worker in South Korea due their synergistic properties. The study is restricted to the years prior to Park Chung-Hee’s rise to power and ends with his assassination.
Highlights
There is a consensus that South Korea intensified its Physical Capital (PC, on) accumulation between 1960 and 1979, but there is a lack of evidence on the role of Human Capital (HC, on) development during this period and even less on the synergy between Total Factor Productivity (TFP, on) and HC and its impact on Output.¿What was the role played by Human and Physical Capital as they relate to Output per worker in South Korea between 1960 and 1979? The hypothesis of this article is to prove that the leap in South Korean development was made possible by the role of HC in Capital accumulation, enabling the correct development of the industrialization process via a combination of HC and Knowledge1
Output is measured as the real Gross Domestic Product (GDP) index; Capital is measured using the Gross Capital Formation index; Labor uses the total number of workers per year; Knowledge takes the form of Total Factor Productivity, calculated using the relative income method concerning optimum capital performance5
These results are consistent with the economic theory and historical evidence concerning the period being studied in South Korea, where doubts exist regarding whether TFP correlates more to Physical or Human Capital
Summary
There is a consensus that South Korea intensified its Physical Capital (PC, on) accumulation between 1960 and 1979, but there is a lack of evidence on the role of Human Capital (HC, on) development during this period and even less on the synergy between Total Factor Productivity (TFP, on) and HC and its impact on Output. The second section will analyze the period between 1960 and 1979 using a historical-qualitative approach These two sections summarize the state of the art regarding South Korea’s economic growth and the institutional reforms required to achieve it. These two sections conclude that there is an absence of theory and empirical analysis focused on the role played by HC and Knowledge in Output per worker.
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