Knowledge Economy: Implications for Education and Learning Carl Dahlman World Bank Presentation at Upgrading Korean Education in the Age of the Knowledge Economy: Context and Issues October 14-15 2002 Seoul, Korea

Structure of Presentation 1. The Knowledge Revolution 2. Knowledge Economy: Definition and Framework Key Issues for the Economic Incentive and Institutional Regime Key Issues for ICT Infrastructure 5. Key Issues in the Innovation System 6. Key Issues for Education 7. Summary and Conclusions ©© Knowledge for Development, WBI

The Knowledge Revolution - 1 Ability to create, access and use knowledge is becoming fundamental determinant of global competitiveness Seven key elements of “Knowledge Revolution” Increased codification of knowledge and development of new technologies Closer links with science base/increased rate of innovation/shorter product life cycles Increased importance of education & up-skilling of labor force, and life-long learning Investment in Intangibles (R&D,education, software) greater than Investments in Fixed Capital in OECD ©© Knowledge for Development, WBI

The Knowledge Revolution - 2 Greater value added now comes from investment in intangibles such as branding, marketing, distribution, information management Innovation and productivity increase more important in competitiveness & GDP growth Increased Globalization and Competition Trade/GDP from 38% in 1990 to 52% in 1999 Value added by TNCs 27% of global GDP Bottom Line: Constant Change and Competition Implies Need for Constant Restructuring and Upgrading ©© Knowledge for Development, WBI

The Knowledge Economy There are many definitions of the “Knowledge Economy”, many emphasizing just information technology and high technology We take a broader definition: “An economy that creates, acquires, adapts, and uses knowledge effectively for its economic and social development.” ©© Knowledge for Development, WBI

2: Framework for Using K4D Four Key Functional Areas Economic incentive and institutional regime that provides incentives for the efficient use of existing and new knowledge and the flourishing of entrepreneurship Educated, creative and skilled people Dynamic information infrastructure Effective national innovation system ©© Knowledge for Development, WBI

A Benchmarking Methodology KAM: 69 structural/qualitative variables to benchmark performance on 4 pillars Variables normalized from 0 (worst) to 10 (best) for 100 countries www1.worldbank.org/gdln/kam.htm Basic scorecard for 14 variables at two points in time, 1995 and 2000 Aggregate knowledge economy index (KE) ©© Knowledge for Development, WBI

Korea: Basic KE Scorecard

Strong Correlation: GDP/Capita & KEI ©© Knowledge for Development, WBI

Korea in the Global Context

Key Elements of Economic Incentive & Institutional Regime Competitive environment as stimulus for improved performance Financial system that mobilizes and allocates capital to its most productive uses Flexible labor markets including support for up-skilling Appropriate legal and regulatory system and strong rule of law that support entrepreneurship Effective safety nets to facilitate adjustment to constant restructuring Effective, transparent and accountable government ©© Knowledge for Development, WBI

Economic and Institutional Regime Scorecard

Scorecard: Governance Source: World Bank Institute K4D Program.

Key Issues for the EIIR in Korea Soundness, Regulation and Efficiency of Banking System and Stock Market Flexibility of Labor Market Corruption and Transparency of Decision-Making Process Corporate Governance and Accountability Property Rights Enforcement of Intellectual Property Rights Industrial Structure: Chaebols vs SMEs Support for High Value Service Industries

Key Issues in the Information Infrastructure Communications infrastructure (from radio to internet) Telecom issues (competition, pricing, regulation) Digital Divide (access, content, language) Use E-govt, E-business, E-education, E-health Legal and regulatory regime for E-economy Software Skills to use ©© Knowledge for Development, WBI

ICT Scorecard

Key Issues for ICT Digital divide. Development of database and networking. Development of skills to utilize the new information infrastructure. Development of software and applications

Key Issues in National Innovation System Tapping into Global Knowledge Trade, foreign investment, tech transfer, Technical journals, travel, internet, conferences Creating and adapting knowledge Pubic vs private R&D; Basic vs applied R&D From specialized research institutions to production Disseminating Knowledge Growth of more efficient enterprises Suppliers of equipment, technical services and info Extension services: agriculture, industry, services Using knowledge Depends on education, skills, complementary inputs Depends on economic and institutional regime ©© Knowledge for Development, WBI

Innovation System Scorecard

Global R&D Effort in Comparative Perspective ©© Knowledge for Development, WBI

Key Issues for the Innovation System in Korea Korea is high spender on R&D and most of it is by the private sector, but Output not commensurate with input. Need to: Streamline role of government R&D Institute Improve interaction between Universities,GRI and Private firms Improve efficiency of private R&D output Participate more effectively in global knowledge Need to improve knowledge management in firms Improve regard for value of knowledge and encourage creativity

Key Issues in Human Resources Access to different levels of education Gender balance Quality of educational content (core technical & social skills, relevance, creativity) Balance among different levels of education Financing & public and private roles Life-long learning opportunities Role of the Ministry of Education and its relations with labor, market, and economy ©© Knowledge for Development, WBI

Education and Human Resources Scorecard

Implications of KE for Education ad Training Systems Stock challenge: rapid creation and diffusion of knowledge means even adults constantly have to learn, therefore need Multiple mechanisms for continuous training beyond formal education system To exploit potential of information and communications technologies to expand training opportunities Effective system for skills assessment and certification Flow challenge: education system must teach students how to learn through their lifetime regardless of when they leave it: implies need for Better teaching and learning pedagogies for core skills Broader interdisciplinary approaches Financing mechanisms to expand access and improve quality ©© Knowledge for Development, WBI

Tertiary Enrollment Rates Finland US Korea Ireland Argentina Singapore Japan Hong Kong Chile Brazil Add Brazil, Chile, Argentina and Mexico Mexico Malaysia ©© Knowledge for Development, WBI

Higher Education Enrollment Ratio (1997)

Educational Attainment in OECD: Adult Population ©© Knowledge for Development, WBI

Korea: Educational Attainment

Key Issues for Education In Korea Korea has high assets in educational investment and attainment But Too academic, not practical or creative Over-regulated: quotas, testing, content Poor links to the labor market Adult learning opportunities limited Gender inequity in higher education and jobs Korea’s main challenge is not so much in terms of access, but more in terms of quality, content and structure

6. Summary and Conclusions The knowledge revolution and the knowledge economy are a challenge to all countries Korea has made large strides towards becoming a knowledge economy. Korea has made rapid advances in the economic incentive and institutional regime, and ICTs. Korea’s biggest challenges are in the innovation and education, in spite of already high investments in these areas Improving the quality of education and strengthening retraining and lifelong learning are at the very center of what Korea has to do to improve its prospects ©© Knowledge for Development, WBI

Knowledge makes the Difference between Poverty and Wealth... Thousands of constant 1995 US dollars Rep. of Korea Difference attributed to knowledge Difference due to physical and human capital How important is knowledge? Forty years ago, Ghana and the Republic of Korea had about the same income per capita. By 1990, Korea’s income was six times higher than Ghana’s. While part of the difference is due to more investment and more workers, half of the difference is attributed to Korea’s greater success in organizing and using knowledge. Ghana