Having enjoyed rapid growth of 8 percent per annum for four decades, Korea has suffered precipitous declines in the GDP growth rate, accompanied by the fall in the efficiency of educational investment, since the late 1990s. This paper argues that the deceleration of economic growth and the drop in the efficiency of education may be at least partly ascribed to the failure of the country’s college entrance system in selecting applicants with better potential. The data suggests that the students attending special high schools such as foreign language high schools or science high schools in Seoul, whose tuition is very expensive, have more than 15 times greater chance of entering Seoul National University (the top university in Korea) compared to those who attend ordinary high schools. Even among the ordinary high schools in Seoul, the chance of entering Seoul National University differs markedly depending on the location of the school, by a factor of 10 between the richest and the poorest district. This suggests that the probability of a student’s entering top universities in Korea may be greatly affected by the factors that depend on the wealth of his or her parents, for example, the amount of resources that is spent on private education. As a result, students with wealthy parents but less potential, instead of poor students with high potential, might be slected by the top universities and matched later to high productivity jobs, which results in an inefficient allocation of human resources. Given the circumstances, a policy of promoting fair competition in education that minimizes the effect of parents’ wealth on students’ chance of entering prestigious colleges is needed for the country to regain efficiency of human capital allocation and economic growth.