Labor Market Rigidities and Social Inequality in Korea: The Role of Legal, Economic and Social Governance


This study explores the organization of the Korean labor market, systemic faults in it leading to undesirable outcomes and their determinants, and consequences for workers and employers. Long-term implications for the arrangement and cohesion of society at large are discussed. The study has three specific objectives: 1) to describe the present labor relations, structure and governance of the Korean labor market through the prism of imperfect/regulated competition theory, with a focus on rigidities and systemic faults in the present organization; 2) to identify structural determinants of the faults, and their intermediateand long-term consequences; and 3) to inform regulatory and legal reforms in order to achieve superior modes of governance and market organization.

The study focuses on understanding of the role of social, structural and regulatory constraints on effective matching of workers and jobs – their sources, manifestations, and consequences. Implications of market rigidities are evaluated vis-à-vis workers’ skill-acquisition decisions and outcomes, their social and intergenerational mobility, and firms’ long-term prospects. Existing policies and policy proposals are reviewed in regard to their impacts. The ultimate aim is to identify opportunities for economic regulation, legal governance and market norms to help overcome the existing faults in labor relations and market organization, and to transition to a more flexible, transparent, equitable, and sustainable form of market organization.


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