Korea's Growth Experience and Long-Term Growth Model

37 Pages Posted: 10 Nov 2017

See all articles by Hyeok Jeong

Hyeok Jeong

KDI School of Public Policy and Management

Date Written: November 9, 2017

Abstract

This paper analyzes the Republic of Korea's rapid and sustained growth experience for the past six decades from the perspective of the neoclassical growth model (the workhorse model of the World Bank?s Long Term Growth Model (LTGM) project). Overall, the sources of Korea's growth were balanced among labor market and demographic factors, capital investment, human capital accumulation, and productivity growth. However, the main engine of growth evolved sequentially, e.g., labor and human capital factors in the 1960s, capital deepening in the 1970s, and then productivity growth for the following periods. The major sources of sustained growth over six decades were human capital accumulation and productivity growth rather than labor or capital investment. A counterfactual calibration of the model explains Korea's actual growth experience well, and shows why gaps between the model?s predictions and the data arise. This illustrates that an appropriate calibration of a simple neoclassical growth model provides useful lessons and tools for policy makers in developing countries in designing their national development strategies.

Keywords: Economic Growth, Economic Theory & Research, Consumption, Industrial Economics, Fiscal & Monetary Policy

Suggested Citation

Jeong, Hyeok, Korea's Growth Experience and Long-Term Growth Model (November 9, 2017). World Bank Policy Research Working Paper No. 8240. Available at SSRN: https://ssrn.com/abstract=3068463

Hyeok Jeong (Contact Author)

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)

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