Human capital, economic growth, and income distribution: Korea and the United States

The central theme of this thesis is the role of human capital as a major source of economic growth and reduced inequality of personal income distribution. This thesis develops a model of economic growth based upon human capital theory and the "capital-skill complementarity hypothesis". Using a nested constant-elasticity-of-substitution (CES) production function, it investigates the contribution of human capital and other inputs to output growth, while taking into account the different substitution relationships among the inputs. It also develops a model of personal income distribution with special emphasis on the levels and types of human capital as key determinants of personal income inequality. The models are then estimated from the time-series data for one developed country (the United States) and one developing country (Korea).;The major findings of this study are the following: The contribution of human capital (primary, secondary, and higher education) and physical capital to economic growth is highly significant, whereas the contribution of raw labor is less substantial. The complementarity of human capital and physical capital, as opposed to the high degree of substitutability of raw labor and physical capital, serves to further highlight the importance of human capital in the process of economic growth. With respect to personal income distribution, human capital acquired from primary and secondary education is the single most important factor in reducing inequality. Investment in basic education not only reduces the overall inequality but also alleviates poverty problems by improving the relative economic status of the low-income group. Once controlled for human capital factors and labor absorption rates, the alleged trade-off between growth and equity is not observed.;To sum up, the findings of this thesis suggest that, for sustained economic growth, investment in human capital should be emphasized along with the expansion of physical capital in the course of economic development. Educational expansion and improvement at the primary and secondary levels are proposed as being especially effective in achieving both faster economic growth and more equal income distribution, with neither coming at the expense of the other.