Human Capital Accumulation through Recurrent Education

One of the biggest challenges in Japan is to promote economic growth in a rapidly aging society. Given declining labor forces in an aging society, it is indispensable to improve the quality of labor forces through human capital accumulation. This is particularly true when human capital in the young depreciates overtime, which may result in insufficient human capital for economic growth. Hence, we need recurrent education for the elderly or retired female workers. This paper studies whether a rapidly aging society can achieve sufficient human capital accumulation when the choice to take recurrent education is left to the private sector. For this purpose, this paper examines an OLG model in which human capital is accumulated through recurrent education as well as tertiary education. We show that the impacts of mortality rate on recurrent education depend on the relation between tertiary education and recurrent education. Specifically, if tertiary education and recurrent education are complementary, which means that recurrent education is more effective for a higher level of tertiary education, a decline in mortality rate promotes recurrent education and accumulates human capital. In contrast, if they are substitutes, which means that recurrent education is less effective for a higher level of tertiary education, a decline in mortality rate suppresses recurrent education and decreases human capital. In the latter case, we need some policies to promote recurrent education, since the level of recurrent education may not be sufficient to achieve sustainable economic growth without policy supports. JEL Classification Codes: J10, I25, O15