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Reassessing the Inflows and Outflows of Unemployment in Korea

Author

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  • Jong-Suk Han

    (Korea Institute of Public Finance)

  • Jiwoon Kim

    (Korea Institute of Public Finance)

Abstract

Using data from the Economically Active Population Survey from 1986 to 2014, we comprehensively examine Korean unemployment dynamics using worker flows: inflow rates and outflow rates. We estimate both flow rates by carefully correcting for time aggregation bias, and quantify the contribution of changes in each flow rate to unemployment variability through steady-state and non-steady-state decompositions. Our baseline analysis reports the average of inflow rates as 1.6% and that of outflow rates as 48%. Moreover, despite the small size of the inflow rates, inflows account for 90% of unemployment variability. The significant contribution of inflows to unemployment fluctuation still appears even under a three-state model that includes inactive workers and heterogeneous flow rates by reasons for unemployment. The large contribution of inflows to unemployment changes despite high outflow rates is a unique feature of the Korean labor market not seen in previous studies of OECD countries.

Suggested Citation

  • Jong-Suk Han & Jiwoon Kim, 2019. "Reassessing the Inflows and Outflows of Unemployment in Korea," Korean Economic Review, Korean Economic Association, vol. 35, pages 25-59.
    • Handle: RePEc:kea:keappr:ker-20190101-35-1-02
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    References listed on IDEAS

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    3. Pietro Garibaldi & Etienne Wasmer, 2005. "Equilibrium Search Unemployment, Endogenous Participation, And Labor Market Flows," Journal of the European Economic Association, MIT Press, vol. 3(4), pages 851-882, June.
    4. Michael W. L. Elsby & Bart Hobijn & Ayşegül Şahin, 2013. "Unemployment Dynamics in the OECD," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 530-548, May.
    5. repec:hal:wpspec:info:hdl:2441/8921 is not listed on IDEAS
    6. Robert E. Hall, 2005. "Employment Efficiency and Sticky Wages: Evidence from Flows in the Labor Market," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 397-407, August.
    7. Darby, Michael R & Haltiwanger, John C & Plant, Mark W, 1985. "Unemployment Rate Dynamics and Persistent Unemployment under Rational Expectations," American Economic Review, American Economic Association, vol. 75(4), pages 614-637, September.
    8. Lin, Ching-Yang & Miyamoto, Hiroaki, 2012. "Gross worker flows and unemployment dynamics in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 26(1), pages 44-61.
    9. Weh-Sol Moon, 2008. "Explaining the Cyclical Behavior of the Korean Labor Market (in Korean)," Economic Analysis (Quarterly), Economic Research Institute, Bank of Korea, vol. 14(4), pages 113-150, December.
    10. Nordmeier, Daniela, 2014. "Worker flows in Germany: Inspecting the time aggregation bias," Labour Economics, Elsevier, vol. 28(C), pages 70-83.
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    Cited by:

    1. Jiwoon Kim, 2022. "The Recent Rise in Youth Unemployment Rate in Korea: A Flow Decomposition Analysis," Korean Economic Review, Korean Economic Association, vol. 38, pages 445-477.

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    More about this item

    Keywords

    Unemployment; Inflow; Outflow; Time Aggregation Bias; Factor Decomposition;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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