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Title Reassessing the Inflows and Outflows of Unemployment in Korea
Author Jong-Suk Han (Korea Institute of Public Finance) and Jiwoon Kim (Korea Development Institute)
Volume 35 Number 1
Pages 25-59 
Keywords Unemployment, Inflow, Outflow, Time Aggregation Bias, Factor
Abstract Using data from the Economically Active Population Survey from 1986 to 2014, we
comprehensively examine Korean unemployment dynamics using worker flows: inflow rates
and outflow rates. We estimate both flow rates by carefully correcting for time aggregation
bias, and quantify the contribution of changes in each flow rate to unemployment
variability through steady-state and non-steady-state decompositions. Our baseline analysis
reports the average of inflow rates as 1.6% and that of outflow rates as 48%. Moreover,
despite the small size of the inflow rates, inflows account for 90% of unemployment
variability. The significant contribution of inflows to unemployment fluctuation still
appears even under a three-state model that includes inactive workers and heterogeneous
flow rates by reasons for unemployment. The large contribution of inflows to
unemployment changes despite high outflow rates is a unique feature of the Korean labor
market not seen in previous studies of OECD countries.
File KER-20190101-35-1-02.pdf
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