Expenditures on Education and Household Saving Ratio (in Korean)

It has been widely acknowledged that expenditures on education play very important roles in households savings and consumption, not to mention of its roles in stimulating economic growth through human capital accumulation. Interestingly, household savings ratio in Korea turned downward almost simultaneously with the education spending as the percentage of households consumption persistently on the rise. In Korea, education cost and the amount of benefits from education investment have been considered affecting households decision on education spending. Hence, this paper attempts to undertake a theoretic and empirical analysis of how changes in such factors would influence household consumption and saving. A historical simulation of the neoclassical growth model, which is mainly driven by shocks to the efficiency and the cost of human capital investment, reveals that increases in education premium and education cost have reduced household savings ratio to a considerable extent. Likewise, panel regression employing KLIPS data supports the result of the simulation analysis.