The natural rate of unemployment in Korea: Estimation and implications

This paper examines the sources and implications of the lowered natural rate of unemployment for Korea. Low levels of natural rates in Korea, in contrast to the high levels for many OECD countries, reflect the degree of labor market differences among the countries. The rising share of female workers with lower unemployment rates, the falling share of young workers with higher unemployment rates, and the lower degree of labor market imperfections resulting from both well-established employment security offices and a labor force that consists of a homogeneous race have contributed to lowering natural rates. The paper also shows that the estimates on the natural rate range from 2.7 to 2.8%, with an actual rate of 2.3-2.8% for the early 1990's, implying that the Korean economy has experienced overemployment and high wage inflation. J. Comp. Econom., February 1996, 22(1), pp. 63-76. Daewoo Research Institute, Seoul 150-010, Korea. (C) 1996 Academic Press, Inc.