Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Labor market duality is a complex and critical issue for many countries that can lower productivity, contribute to inequality and result in negative externalities. In this paper, I study duality in the Korean labor market and analyze its sources and potential policy options. I find that employment protection legislations and large productivity differentials are the key drivers of Korea’s duality. In addition, applying a general equilibrium search-and-matching model and calibrating it to the Korean economy, I show that well-calibrated flexicurity policies can significantly reduce duality and inequality and raise welfare and productivity. Notably, the introduction of all three pillars—flexiblity, a strong safety net and active labor market policies—is critical for its success. If only one pillar is introduced it can result in negative side-effects and might not reduce duality.

Labor --- Macroeconomics --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Labor Economics Policies --- Labor Force and Employment, Size, and Structure --- Demand and Supply of Labor: General --- Wages, Compensation, and Labor Costs: General --- Labor Economics: General --- Labour --- income economics --- Labor markets --- Active labor market policies --- Economic theory --- Labor market --- Labor economics --- Manpower policy --- Korea, Republic of