Hysteresis in Korean Labor Market with Alternative Measures of Labor Utilization (in Korean)

Hyun Hak Kim and Kwang Myoung Hwang ()
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Kwang Myoung Hwang: International Economics Team, Economic Research Institute, The Bank of Korea

No 2014-29, Working Papers from Economic Research Institute, Bank of Korea

Abstract: Hysteresis in the labor market describes that indicators that once changed due to the economic downturn remain at the new level even after the labor market returns to normal. Most of literatures on the Korean labor market have consistently shown evidences of the existence of hysteresis in employment rates and labor force participation rates, but not in unemployment rates. We attribute such inconsistency to persons marginally attached to the labor force and persons employed part time for economic reasons. Therefore, we construct extended measures for unemployment from 2003 to 2013 using micro data of Statistics Korea, and investigate the presence of hysteresis based on the new measures. We have found that the alternative measures of unemployment rates support the existence of hysteresis in the Korean labor market, which is consistent with the result in labor force participation rates and employment rates. The existence becomes more significant for the unemployment rates of female and aged-groups of 30's and 40's. It suggests that the prevention of the persistently high unemployment rates among female and middle-aged group would play an important role in avoiding prolonged recessions and raising potential growths.

Keywords: Hysteresis; Unemployment Rate; Unit Root Test; ARFIMA (search for similar items in EconPapers)
JEL-codes: E24 J64 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2014-09-20
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