Some analyses are showing a grim picture of Korea that the persistent trend of low birth rate and population aging will result in its annual economic growth rate of less than 1 percent after 2050. It is a warning that the country might fall into a swamp of long-term low growth if it fails to overcome the labor shortage caused by population decline through capital investment or technological innovation.
Lee Jong-hwa, professor of economics at Korea University and president of the Korean Economic Association, made such remarks in his keynote address at the 2023 Joint Conference on Economics held on Thursday at the Korea University International Hall in Seoul. Mr. Lee’s paper titled “The Growth Model of Decreasing Population and its Application to the Korean Economy” estimates Korea’s average annual and per capita GDP growth rates from 2050 to 2060 to be 0.9 percent and 2.3 percent, respectively. The figures were based on the National Statistical Office’s estimations of the country’s future population.
Demographic changes affect not only the labor force but also capital input and technological progress. In a model assuming that technological progress and human capital growth rates will remain at the current level, Korea’s GDP growth rate between 2050 and 2060 was 1.5 percent, and its per capita GDP growth rate was 2.9 percent. However, in a scenario with a physical capital investment rate constantly declining, the two figures fell to a staggering 0.2 percent and 1.5 percent, respectively. “If the Korean economy successfully achieves technological innovation and higher quality of labor force, maintains the physical capital investment rate at a high level, and replaces insufficient labor with capital and technology, it may take the path of high growth,” said Prof. Lee.
The 2023 Joint Conference on Economics, organized by the Korean Economic Association, will be held for two days until Friday. On its second day, Kim Heung-chong, president of the Korean Institute for International Economic Policy, will give keynote remarks under the theme of “Will economic security change the global economic paradigm?” Around 1,500 researchers from 58 economics associations will join the conference, and about 450 papers will be introduced.
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