Is Korea Number One in Human Capital Accumulation?: Education Bubble Formation and Its Labor Market Evidence

66 Pages Posted: 9 Aug 2014

See all articles by Ju-Ho Lee

Ju-Ho Lee

KDI School of Public Policy and Management

Hyeok Jeong

KDI School of Public Policy and Management

Song-Chang Hong

Korea Development Institute (KDI)

Date Written: August 1, 2014

Abstract

This paper proposes a new conceptual framework of “education bubble” in analyzing the human capital investment and formation. We apply this concept to the Korean experience. Sixty years ago Korea was destitute not only of income but also of all sorts of education, but now it is one of the leading countries in educational attainment as well as in other conventional measures of human capital investment indices such as the PISA tests and the number of researchers. We argue, however, that such phenomenal expansion of these quantitative measures involved the problems of enormous burden of private tutoring and the mass production of low-quality higher education institutions, which did not contribute to increasing the effective unit of human capital particularly since the 1990s. We find that despite rapid increase in private educational expenditure for college entrance, the college wage premiums for the bottom two decile groups of 4-year college graduates and the bottom half of 2-year college graduates are both negative. This striking evidence from the microeconomic data suggests that such phenomenal expansion in aggregate quantity of human capital indices of Korea could be a bubble. We learn from this evidence that the quantitative expansion of education may not be good enough for sustainable development, which would guide the design of human capital policy not only for Korea but also for other developing countries.

Suggested Citation

Lee, Ju-Ho and Jeong, Hyeok and Hong, Song-Chang, Is Korea Number One in Human Capital Accumulation?: Education Bubble Formation and Its Labor Market Evidence (August 1, 2014). KDI School of Pub Policy & Management Paper No. 14-03. Available at SSRN: https://ssrn.com/abstract=2476160 or http://dx.doi.org/10.2139/ssrn.2476160

Ju-Ho Lee (Contact Author)

KDI School of Public Policy and Management ( email )

P.O. Box 184
Seoul, 130-868
Korea, Republic of (South Korea)
+82 2 3299 1016 (Phone)

Hyeok Jeong

KDI School of Public Policy and Management ( email )

P.O. Box 184
Seoul, 130-868
Korea, Republic of (South Korea)
+82-2-880-2921 (Phone)
+82-2-879-1496 (Fax)

Song-Chang Hong

Korea Development Institute (KDI) ( email )

263 Namsejong-ro
Sejong-si 30149
Korea, Republic of (South Korea)

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