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Title: City size, labor productivity and wages in Korea
Authors: Lee, Bun Song
Hong, Sung Hyo
Wohar, Mark E.
Keywords: Local labor markets
Spatial wage disparities
Localization economies
Urbanization economies
Issue Date: 2017
Publisher: © World Scientific Publishing Company
Citation: LEE, B.S., HONG, S.H. and WOHAR, M.E., 2017. City size, labor productivity and wages in Korea. Singapore Economic Review, 63 (1), pp. 1–26.
Abstract: This study attempts to derive policy implications for spatially-balanced growth through empirical analysis on determinants of regional wage gaps in Korea. Combes et al. [(2008) Spatial wage disparities: Sorting Matters. Journal of Urban Economics, 63, 723–742] suggest that regional wage gaps result from the regional differenc es in workers’ human capital, nonhuman endowments, and agglomeration economies. The current study applies a similar two-stage estimation model to the 2006 cross-sectional data for 4009 workers from the Korean Labor Panel Survey (KLPS) performed by the Korea Labor Institute. Localization economies are positive external effects from the geographic concentration of firms in the same industry. We find evidence of localization economies in our research. The second stage estimation results for the determinants of regional wage gaps show that the average wage is higher in areas that concentrate in a small number of industries rather than in areas that are diversified with many industries. This result is in direct contrast to the findings from Combes et al. [(2008) Spatial wage disparities: Sorting Matters. Journal of Urban Economics, 63, 723–742] who analyze the French labor market data. This difference can be explained by the possibility that in Korea the improved quality of life (e.g., better education services) and/or the increase in job mobility in large diversified metropolitan areas induce workers to accept relatively lower wages in those areas. In order to resolve the bias in the estimation of the agglomeration effects caused by the heterogeneity of workers, we also performed panel regressions of the 2nd 2000 and the 7th 2005 KLPS panel data of 7431 observations. The panel regression results also support our original findings from regressions of the 8th 2006 KLPS data.
Description: Closed access. This article was published in the Singapore Economic Review [© World Scientific Publishing Company] and the definitive version is available at: https://doi.org/10.1142/S0217590817500138
Version: Published
DOI: 10.1142/S0217590817500138
URI: https://dspace.lboro.ac.uk/2134/27367
Publisher Link: https://doi.org/10.1142/S0217590817500138
ISSN: 0217-5908
Appears in Collections:Closed Access (Business School)

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