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

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.