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Quantitative Regional Economic and Environmental Analysis for Sustainability in Korea pp 45–66Cite as

Labor Market Distortion with Discouraged Worker Effects in Korea

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Part of the book series: New Frontiers in Regional Science: Asian Perspectives ((NFRSASIPER,volume 25))

Abstract

This paper examines skill mismatch problems in regional labor markets due to discouraged worker effects in South Korea. In Seoul metropolitan areas (SMAs), supply surplus for highly educated workforce among the youth is evident and causes serious distortion not only in SMA but also in national labor market. On the contrary, the shortage of low-skilled workers in Korea due to overinvestment in human capital forces out establishments to other countries with cheaper labor costs. Proposed regression models in this study specify how the share of discouraged workers in a regional labor market can be determined by various factors such as demographic structures, labor market conditions, and migration pattern with regional and/or temporal fixed effects. The regional-temporal fixed effect model found to be the most important factor in explaining how these factors determine the relative stock of discouraged workers in a region. Among the variables describing regional labor market conditions, only two, labor force participation rate of young cohort (aged between 15 and 29) and that of highly educated population (college graduate or higher), directly influenced regional labor market distortion by determining the regional stock of discouraged workers. With more active participation of these groups in a labor market, the overall discouraged worker effect in a region reduces, leading to enhanced labor market efficiency. Migration pattern does not play any role on regional discouraged workers. This indicates the limited role of interregional migration on factor price equalization among regional labor markets in Korea.

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Notes

  1. 1.

    The fifteen regions include seven metropolitan areas, Seoul, Incheon, Busan, Daegu, Gwangju, Daejeon, and Ulsan, and eight provinces (excluding the seven metropolitan areas). The eight provinces are Gyeonggi, Gangwon, Chungbuk, Chungnam, Jeonbuk, Jeonnam, Gyeongbuk, and Gyeongnam.

  2. 2.

    Official unemployment rate (U-3) is defined as a ratio of the number of unemployed to the total labor force, where the total labor force is composed of unemployed and employed.

  3. 3.

    Beveridge curves describe the negative relation between unemployment rates and job vacancy rates in labor markets. Outward shift of Beveridge curve indicates increasing inefficiency due to potential mismatch between those unemployed and job openings.

  4. 4.

    For more detail on the Korean labor statistics, visit the following link, http://laborstat.moel.go.kr/

  5. 5.

    Official unemployment rate in Korea is the share of unemployed out of the total labor force, which is composed of employed and unemployed. Those who voluntarily drop from labor force due to economic condition are not taken into account.

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Authors and Affiliations

  1. School of Public Policy & Leadership, Greenspun College of Urban Affairs, University of Nevada, Las Vegas, NV, USA

    Jaewon Lim

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Editors and Affiliations

  1. Department of Agricultural Economics and Rural Development and Research Institute of Agricultural and Life Science, Seoul National University, Seoul, Korea (Republic of)

    Euijune Kim

  2. Department of Agricultural Economics and Rural Development, Interdisciplinary Program in Agricultural and Forest Meteology, and Research Institute for Agriculture and Life Sciences, Seoul National University, Seoul, Korea (Republic of)

    Brian H. S. Kim

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Lim, J. (2016). Labor Market Distortion with Discouraged Worker Effects in Korea. In: Kim, E., Kim, B. (eds) Quantitative Regional Economic and Environmental Analysis for Sustainability in Korea. New Frontiers in Regional Science: Asian Perspectives, vol 25. Springer, Singapore. https://doi.org/10.1007/978-981-10-0300-4_3

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  • DOI: https://doi.org/10.1007/978-981-10-0300-4_3

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