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Labor Market Rigidity at Home and Multinational Corporations’ Flexible Task Reallocation Abroad

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  • Ahn,Jaebin
  • Choi,Jaerim
  • Chung,Sunghoon

Abstract

An unprecedented regime change following the 2017 presidential impeachment led to adramatic shift to more rigid labor market policies in the Republic of Korea, represented by consecutive double-digithikes in the minimum wage in the next two years. Using a firm-level data set with detailed information about foreignaffiliates for 2013~19, this paper assesses the employment consequences of stricter labor market regulations. Theempirical evidence uncovers a relatively unexplored mechanism through which domestic labor market rigidity canpotentially reduce domestic employment as multinational firms with flexible internal networks reallocate tasksacross borders.

Suggested Citation

  • Ahn,Jaebin & Choi,Jaerim & Chung,Sunghoon, 2022. "Labor Market Rigidity at Home and Multinational Corporations’ Flexible Task Reallocation Abroad," Policy Research Working Paper Series 10114, The World Bank.
    • Handle: RePEc:wbk:wbrwps:10114
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