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Seoul Journal of Economics - Vol. 25 , No. 1
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Seoul Journal of Economics - Vol. 25, No. 1, pp. 1-23
Abbreviation: SJE
ISSN: 1225-0279 (Print)
Print publication date 29 Feb 2012
Received 23 Apr 2011 Revised 31 Dec 2011 Accepted 31 Dec 2011

Wage Inequality and the Contribution of Capital, Differential Labor Quality and Efficiency to Economic Growth in Korea, 1965-2007
Sung Yeung Kwack
Professor of Economics, Howard University, Washington, D.C., USA

JEL Classification: E13, J31, N15, O30, O47, O53

Abstract

We show that skilled and unskilled labors are imperfect substitutes and that capital and skilled labor are complementary in production. The Korean economy has experienced skill-biased technical changes. The capital stock growth is found to be the main source of the economic growth. The contribution of the efficiency and labor input growth of skilled workers is the second most important source. The rate of contribution of TFP growth to GDP growth has increased from 27% in 1991-1996 to 36% in 2001-2007. This paper shows that Korea’s policy of educating its workforce has boosted productivity and growth and it prevented a widening in wage inequality.

Keywords: Wage inequality, Labor efficiency, Skill-biased technological change, TFP, Korea
Acknowledgments

This is the last article the author submitted to this journal before his sudden death from a deadly fire at his home in April 2011. The editors felt deeply sorry for this news, and have decided to publish his article in appreciation of his life-long contribution to the study of the Korean economy. His last position was a Professor of Economics, Howard University, Washington, D.C., USA. He would like to thank John Bennett, Peter Clark, Satish Wadhawan, and Young Sun Lee for their helpful suggestions. He was also grateful to the Institute for Monetary & Economic Research, the Bank of Korea for the assistance services provided. A portion of this paper was completed while he was a visiting professor at the Institute. The views expressed are not necessarily those of the Institute and the Bank of Korea.

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