Labor Market Duality in Korea

June 1, 2018

Preview Citation

Format: Chicago

Johanna Schauer. Labor Market Duality in Korea, (USA: International Monetary Fund, 2018) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Labor market duality is a complex and critical issue for many countries that can lower productivity, contribute to inequality and result in negative externalities. In this paper, I study duality in the Korean labor market and analyze its sources and potential policy options. I find that employment protection legislations and large productivity differentials are the key drivers of Korea’s duality. In addition, applying a general equilibrium search-and-matching model and calibrating it to the Korean economy, I show that well-calibrated flexicurity policies can significantly reduce duality and inequality and raise welfare and productivity. Notably, the introduction of all three pillars—flexiblity, a strong safety net and active labor market policies—is critical for its success. If only one pillar is introduced it can result in negative side-effects and might not reduce duality.

Subject: Active labor market policies, Employment, Labor, Labor markets, Wages

Keywords: Active labor market policies, Company welfare, Employment, Employment contracts, Flexicurity, Gender pay gap, Global, Korea, Labor market duality, Labor markets, On-the-job training, Pay incidence, Salary owner, Salary worker, Severance pay, Temporary contract, Temporary worker, Tier worker, Unemployment rate, Wage difference, Wage profile, Wages, WP

Publication Details

Pages:

36
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/126
Stock No:

WPIEA2018126
ISBN:

9781484357934
ISSN:

1018-5941

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