Industrial Diversity and Frictional Unemployment (in Korean)

Sangheon Lee ()
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Sangheon Lee: Korea Capital Market Institute

Economic Analysis (Quarterly), 2011, vol. 17, issue 2, 1-26

Abstract: The purpose of this study is to test a hypothesis that whether higher industrial diversity reduces frictional unemployment in a region, using a job matching function. The main findings from the estimation results are as follows. First of all, the assumption of constant return to scale that is applied to job matching function is found to be reasonable. Second, if industrial diversification measured by Herfindhal and Dixit-Stiglitz index in the region is higher than others, the matching rate between firms and workers increases, and the frictional unemployment becomes lower than others. Finally, increases in congestion cost and reservation value caused by high population density interrupts the job matching between firms and workers. The above results suggest that recent policy of city specialization in Korea may be to increase the frictional unemployment. That is, dispersed investment in a city is more effect than concentrated investment when it comes to reducing frictional unemployment. Also, the phenomenon that population concentrates in metropolitan areas give rise to an increase in frictional unemployment. Therefore, this study supports a policy designed to effectively disperse population from metropolitan to other area.

Keywords: Industrial Diversity; Population Density; Frictional Unemployment; Job Matching Function; Constant Return to Scale (search for similar items in EconPapers)
JEL-codes: J2 J6 (search for similar items in EconPapers)
Date: 2011
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