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Changes in Korean Wage Inequality, 1980−2005

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Author Info

  • Kang, Byung-Goo

    () (Inha University)

  • Yun, Myeong-Su

    () (Tulane University)

Abstract

Korea is known not only for rapid economic growth but also relatively low wage inequality. It is one of the few countries in which wage inequality decreased during the 1980s, though in recent years wage inequality has increased. This paper studies what factors contributed to the changes in wage inequality during the last two decades. This paper implements a recently developed Oaxaca-type inequality decomposition method to decompose "U" shaped changes in inequality into characteristics (quantity), coefficients (price) and residuals effects at both overall and detailed levels. The results of decomposition analysis show that changes in the wage structure significantly contribute to the changes in wage inequality in Korea. The coefficients effect of human capital factors has played a major role not only in increasing wage inequality from mid-1990s, but also decreasing wage inequality in 1980s and early 1990s.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3780.

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Length: 33 pages
Date of creation: Oct 2008
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Handle: RePEc:iza:izadps:dp3780

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Related research

Keywords: decomposition analysis of inequality; earnings equation; coefficients (price) effect; characteristics (quantity) effect; residuals effect;

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References

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  1. Gang, Ira N. & Yun, Myeong-Su, 2002. "Decomposing Male Inequality Change in East Germany During Transition," IZA Discussion Papers 579, Institute for the Study of Labor (IZA).
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  7. TH Gindling & Juan Diego Trejos, 2005. "Accounting for Changing Earnings Inequality in Costa Rica, 1980-99," The Journal of Development Studies, Taylor and Francis Journals, vol. 41(5), pages 898-926.
  8. Blau, Francine D & Kahn, Lawrence M, 1996. "International Differences in Male Wage Inequality: Institutions versus Market Forces," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 791-836, August.
  9. Fields, Gary S & Yoo, Gyeongjoon, 2000. "Falling Labor Income Inequality in Korea's Economic Growth: Patterns and Underlying Causes," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 46(2), pages 139-59, June.
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  12. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1, March.
  13. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
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Cited by:
  1. Yunhee Kim & Jeong-Dong Lee & Almas Heshmati, 2009. "Analysis of Pay Inequality and its Impacts on Growth and Performance in the Korean Manufacturing Industry," TEMEP Discussion Papers 200902, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Jan 2009.

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