Unemployment and Labor Force Participation in Korea: A Fourier Approach

Yılancı V., Özgür Ö.

POLITICKA EKONOMIE, sa.Forthcoming, ss.1-17, 2023 (SSCI)

  • Yayın Türü: Makale / Tam Makale
  • Basım Tarihi: 2023
  • Dergi Adı: POLITICKA EKONOMIE
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus, International Bibliography of Social Sciences, ABI/INFORM, EconLit, PAIS International, Political Science Complete, Sociological abstracts, Worldwide Political Science Abstracts
  • Sayfa Sayıları: ss.1-17
  • Çanakkale Onsekiz Mart Üniversitesi Adresli: Evet

Özet

Purpose: This study examines the long-run relationship between the unemployment rate and labor force participation rate in South Korea from June 1999 to January 2023.  

Design/methodology/approach: The study utilizes the traditional Johansen cointegration test and augments it with Fourier terms to control for an unknown number of breaks in the cointegration system.

Findings: The empirical findings suggest a significant long-run relationship between the unemployment rate and labor force participation rate in South Korea, which provides evidence against the unemployment invariance hypothesis. The study also finds evidence of the discouraged worker effect for males and the added-worker effect for females. The findings of this study have important implications for policymakers in creating more effective plans to lower unemployment and foster economic growth in South Korea.

Originality/Value: This study contributes to the literature by clarifying the validity of the unemployment invariance hypothesis in the Korean economy, which is regarded as a growth miracle in the literature. Instead of using the standard configuration of dummy variables, the Johansen cointegration technique now has the ability to adjust for an unknown number of multiple structural breaks in the cointegration system.