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The Annals of Regional Science

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28-08-2015 | Special Issue Paper

Contributions of human capital investment policy to regional economic growth: an interregional CGE model approach

Authors: Jaewon Lim, Changkeun Lee, Euijune Kim

Published in: The Annals of Regional Science | Issue 2-3/2015

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Abstract

The purpose of this paper is to examine the regional impact of educational investment policies on migration and economic growth utilizing an interregional computable general equilibrium (ICGE) model with a human capital module. The CGE model is developed for three industrial sectors of two regions in South Korea, specifying the behaviors of the following economic agents: six producers, two regional households, two regional governments, a national (central) government, and the rest of the world. The model primarily focuses on structural linkages among migration, university education, labor productivity, and human capital formation in the short run and long run. Our paper demonstrates that the impact of the human capital investment on GRP growth was higher for the 30s age cohort than for any other age cohort, and this holds for both the Seoul Metropolitan Area (SMA) and the rest of Korea (ROK). With the aim of reducing regional disparity and of redistributing concentrated populations, the national government’s human capital investment policy should focus on local job training programs with the target population of the 30s age cohort in the ROK.

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The Lisbon strategy is an economic development plan to make the EU “the most competitive and dynamic knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion” by 2010.

We assume there are two regions, representing a single representative agent for each region (SMA and ROK). Therefore, there are two households to avoid a computational difficulty in finding an optimal solution. If the ICGEP model would be composed of 16 households (eight age cohorts by two regions), it could not identify optimal solution due to a computational issue.

This is quite distinct from other CGE models.

The wage variable has to be used as a proxy one for the consumption power instead of total income because of statistical significance and data limitations by age cohort.

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Title: Contributions of human capital investment policy to regional economic growth: an interregional CGE model approach
Authors: Jaewon Lim
Changkeun Lee
Euijune Kim
Publication date: 28-08-2015
Publisher: Springer Berlin Heidelberg
Published in: The Annals of Regional Science / Issue 2-3/2015
Print ISSN: 0570-1864
Electronic ISSN: 1432-0592
DOI: https://doi.org/10.1007/s00168-015-0690-0

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