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Analysis of Pay Inequality and its Impacts on Growth and Performance in the Korean Manufacturing Industry

Author

Listed:
  • Kim, Yunhee

    (Seoul National University)

  • Lee, Jeong-Dong

    (Seoul National University)

  • Heshmati, Almas

    () (Jönköping University, Sogang University)

Abstract

This paper examines the relationship between pay inequality, economic growth, and performance in Korea. Pay inequality is estimated by using Theil's index to identify the factors determining the level of pay inequality, and establish its relationship with economic growth and performance. For the empirical results we use panel data on the Korean manufacturing sector for the period 1993 to 2003. It appears that a large portion of rising pay inequality can be attributed to rising relative pay among the small-sized firms, outside the capital city area and in the ICT sectors which were affected by the economic structural reform since 1997. The findings support the hypothesis of an "augmented" Kuznets Curve, according to which certain developed countries are found on an upward-sloping addendum to the original formulation of Kuznets.

Suggested Citation

  • Kim, Yunhee & Lee, Jeong-Dong & Heshmati, Almas, 2008. "Analysis of Pay Inequality and its Impacts on Growth and Performance in the Korean Manufacturing Industry," IZA Discussion Papers 3774, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp3774
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    References listed on IDEAS

    as
    1. Daron Acemoglu, 2003. "Cross-Country Inequality Trends," Economic Journal, Royal Economic Society, vol. 113(485), pages 121-149, February.
    2. Kwack, Sung Yeung, 1998. "Factors contributing to the financial crisis in Korea," Journal of Asian Economics, Elsevier, vol. 9(4), pages 611-625.
    3. Inha Oh & Almas Heshmati & Chulwoo Baek & Jeong-Dong Lee, 2009. "Comparative Analysis Of Plant Dynamics By Size: Korean Manufacturing," The Japanese Economic Review, Japanese Economic Association, vol. 60(4), pages 512-538.
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    5. Dong, Xiao-Yuan, 2005. "Wage inequality and between-firm wage dispersion in the 1990s: A comparison of rural and urban enterprises in China," Journal of Comparative Economics, Elsevier, vol. 33(4), pages 664-687, December.
    6. Kang, Byung-Goo & Yun, Myeong-Su, 2008. "Changes in Korean Wage Inequality, 1980−2005," IZA Discussion Papers 3780, Institute for the Study of Labor (IZA).
    7. Jahyeong Koo & Sherry L. Kiser, 2001. "Recovery from a financial crisis: the case of South Korea," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q IV, pages 24-36.
    8. Gregory, Gary & Harvie, Charles & Lee, Hyun-Hoon, 2002. "Korean SMEs in the Wake of the Financial Crisis: Strategies, Constraints and Performance in a Global Economy," Economics Working Papers wp02-12, School of Economics, University of Wollongong, NSW, Australia.
    9. Heshmati, Almas, 2004. "Inequalities and Their Measurement," IZA Discussion Papers 1219, Institute for the Study of Labor (IZA).
    10. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Econometrica, Econometric Society, vol. 70(6), pages 2295-2350, November.
    11. Roland Bénabou, 1996. "Inequality and Growth," NBER Chapters,in: NBER Macroeconomics Annual 1996, Volume 11, pages 11-92 National Bureau of Economic Research, Inc.
    12. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
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    Cited by:

    1. Jongsu Lee & Chul-Yong Lee, 2009. "A Forecasting Model Incorporating Replacement Purchase: Mobile Handsets in South Korea's Market," TEMEP Discussion Papers 200904, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Apr 2009.
    2. Chul-Yong Lee & Jongsu Lee, 2009. "Demand Forecasting in the Early Stage of the Technology's Life Cycle Using Bayesian update," TEMEP Discussion Papers 200903, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Apr 2009.

    More about this item

    Keywords

    pay inequality; financial crisis; Kuznets Curve; economic growth; performance;

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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