South Korea’s lift-off to development: The role of Human Capital and Productivity in economic growth, 1960-1979

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.