Human capital accumulation through recurrent education

Population aging is one of the most important policy issues in many industrialized countries including Italy, Japan, and Korea. Without appropriate policy prescriptions, it would have a serious negative impact on potential growth through reducing the working age population and increasing the retired age population. Under declining population, human capital accumulation is a key factor in enhancing potential growth. However, to achieve a desirable human capital accumulation, an aging society may need a different policy than a society with a larger number of young workers. When the size of the young population is large, it is likely that education for the young plays a key role in human capital accumulation. However, human capital accumulated in the young may become obsolete for elder workers. Thus, in an aging society where young workers are scarcer than old workers, we need recurrent education for human capital accumulation to sustain economic growth.    

This paper analyzes human capital accumulation through recurrent education. We focus not only on education for the young which depends on learning from the human capital of their parents, but also on two types of recurrent education, i.e. recurrent education in the young and recurrent education in the old, both of which improve their productivities when they become old. We utilize an overlapping generations (OLG) model to treat education as an intergenerational transfer of knowledge.

We firstly show that to the extent that the level of human capital exceeds a threshold value, the introduction of recurrent education promotes human capital accumulation. Secondly, we show that given the probability of death, the wages, and the interest rate, recurrent educations in the young and in the old are complementary. If the length of recurrent education in the young increases, the level of recurrent education in the old also increases. Furthermore, a decrease in the probability of death increases recurrent education in the young.

Thirdly, we show that declines in population growth and the probability of death always have a positive impact of the recurrent education on human capital accumulation. This implies that under depopulation and aging, recurrent education may overcome the negative impact on human capital accumulation.