A study has found that even if the population declines, the growth rate of the Korean economy can vary widely depending on investment in physical and human capital and technological innovation. Attention is drawn to the fact that quantitative expansion is important to respond to the current crisis of reducing the workforce, but the quality of the workforce must be invested and improved to go along with it.
Lee Jong-hwa, a professor of economics at Korea University, presented a thesis on this topic at the 2023 Joint Conference on Economics on the 2nd, entitled “A Growth Model with a Declining Population and Its Application to the Korean Economy .” As a result of Professor Lee simulating a growth model based on the National Statistical Office’s population projections for the future, the average annual GDP growth rate between 2050 and 2060 was estimated to be 0.9% and the per capita GDP growth rate 2.3%. Given that last year’s GDP growth rate was 2.6%, it means that the impact of population decline on economic growth is significant. In the 2000s, Korea recorded growth in the 0% range only twice: in 2009 right after the global financial crisis (0.8%) and in 2020 during the COVID-19 crisis (-0.7%).
Even if the population decreases, the GDP growth rate is predicted to vary depending on whether physical capital investment, technological progress, and human capital progress. If the rate of physical capital investment is gradually reduced until 2060, the average GDP growth rate between 2050 and 2060 will be only 0.2% per year. In this case, the average annual growth rate of GDP per capita was 1.5%. If the rate of technological progress and human capital growth remained close to current levels, GDP growth averaged 1.5% per year. It was also estimated that the growth rate of GDP per capita was an annual average of 2.9%.
Professor Lee said, “The implication of this study is that low population growth does not immediately lead to a decline in economic growth. He said, “It’s a big problem because the workforce decreases when the population decreases, but it’s more important to turn the crisis into an opportunity.” he added.
As the 52nd president, Professor Lee led the Korea Economic Association for the past year. His successor, Hwang Yun-jae, chair professor of economics at Seoul National University, was officially inaugurated at the regular general meeting of the Korea Economic Association held on the same day.
Correspondent Cho Mi-hyun mwise@hankyung.com
