The Analysis of Hysteresis in Youth Unemployment (in Korean)

Namju Kim ()
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Namju Kim: Economic Research Institute, Bank of Korea

Economic Analysis (Quarterly), 2019, vol. 25, issue 2, 96-131

Abstract: Initially entering into the job market during hard times with unfavorable market institutions has a persistent, negative effect on young workers’ subsequent employment. This paper analyzes hysteresis in youth unemployment by using a composite fixed-effect panel data model. Data sets for the age-cohort unemployment rate and for labor market institutions are constructed from OECD statistics from 21 advanced economies, including Korea, from 1985 to 2017, and are then readjusted to match with the peculiarities of the Korean market. In Korea, with a less-aggressive stance on active labor market policy spending, a male worker who experiences a one percentage point higher youth unemployment rate when he was 20- to 29-years-old has a 0.146 percentage point higher unemployment rate at the ages of 30-to 34-years-old and a 0.035 percentage point higher unemployment rate at the age of 35- to 39-years-old. These figures are larger than those in most countries that have more aggressive spending schemes. These findings point out that hysteresis in the Korean labor market can be mitigated by expanding active labor market policy spending more aggressively and more effectively.

Keywords: Hysteresis; Unemployment; Cohort analysis; Persistence (search for similar items in EconPapers)
JEL-codes: E24 J64 J65 K31 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:bok:journl:v:25:y:2019:i:2:p:96-131

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