Inhyuk Choi

Temporary employment is widespread and persistent in advanced economies. The data show that: (i) the less-educated are over-represented in temporary jobs; (ii) although training accelerates the transition to permanent employment, training incidence is relatively low among temporary workers. To understand these facts, I build a search model with endogenous contract types and training decisions. In the model, firms hire the low-skilled as temporary workers to avoid the firing costs imposed on permanent contracts, and employers provide little training to temporary workers because the investment horizon is truncated. Consequently, the model endogenously reproduces the persistence of temporary employment, known as the temporary job trap. I estimate the model on Korean labor market data. The results suggest that current policy depresses output 9.4% below its potential, with 43% of that gap attributable to the lack of training for temporary workers. Counterfactual policy analysis indicates that training subsidies can eliminate nearly 80% of the output loss.

This paper aims to classify the elderly in Korea based on the (dis)similarity of their transition patterns in the labor market. To assign the elderly to groups, I apply the K-means clustering algorithm to the history of employment transitions observed in the Korean Labor and Income Panel Study. The clustering outcome indicates that older people can be classified into two groups: group A (91.1%) versus group B (8.9%). The transition pattern of group A individuals is characterized by short-term unemployment and long-term employment. Those assigned to group B, in contrast, tend to have experienced long-term unemployment and short-term employment. It is also documented that whether an individual belongs to one group or the other cannot be fully predicted by basic demographics, region, industry, and occupation. Lastly, I provide some empirical evidence that the heterogeneity with respect to employment transitions may be more relevant in predicting one's economic conditions after retirement, and understanding the volatility and persistence of unemployment.

In March 2020, the tax credits for commercial property owners reducing rent (hereafter, rent reduction credit) were introduced to alleviate the rent burden of micro business owners who were struggling due to the spread of COVID-19. This paper studies the current status of the rent reduction credit, and analyzes its impact on the rent burden of micro business owners. Using data from the Surveys on Micro Businesses and the Surveys on Small and Medium Enterprises, we perform difference-in-differences and first-difference analysis, and find no statistically significant rent reduction effects for micro business owners. This is attributable to the fact that less than 10% of commercial property owners claimed the rent reduction credit. In fact, the rent of micro business owners in 2020 decreased compared with that in 2019, which is mainly due to the drop in the demand of commercial property rent market. Based on these findings, this study proposes the gradual abolition of the rent reduction credit. At the same time, the need to improve the effectiveness of Article 11 (Right of Claim for Increase or Decrease of Rent) of the Commercial Building Lease Protection Act is emphasized.

This study evaluates the extent to which labor market transition rates contributed to fluctuations and changes in the unemployment rate among the elderly, and analyzes the impact of the Senior Employment Program on the Korean labor market. Using seasonally adjusted monthly data from the Economically Active Population Survey, we first document that the fluctuations in the unemployment rate among the 55-64 age group were largely driven by the job-separation rate, while the fluctuations in the unemployment rate among the 65-74 age group were mostly driven by the job-finding rate. We also find that the increase in the unemployment rate from 2014 to 2019 among the 65-74 age group can be mainly explained by a decrease in the job-finding rate, whereas the decline in the unemployment rate from the third quarter of 2020 to the first quarter of 2023 can be primarily explained by a decrease in the job-separation rate. Meanwhile, the empirical analysis reveals that an increase in public-sector jobs is associated with 0.4 decrease in private-sector jobs. Further, the wage of elderly workers in the private sector is estimated to have risen, while the average wage and working hours of elderly workers (including those in public-sector jobs) is estimated to have decreased. These findings suggest that the Senior Employment Program mainly targeting the 65 and older age group can crowd out jobs in the private sector, a lesson that needs to be considered when redesigning the program.

This study explores the effectiveness of the Unified Tax Credit for Job Creation, Article 29-8 of the Act on Restriction on Special Cases Concerning Taxation. The Unified Tax Credit for Job Creation, which was implemented in Korea in 2023, is a measure that provides tax credits to enterprises who increase the number of full-time employees. We develop a structural model featuring the characteristics of the Unified Tax Credit for Job Creation, and calibrate the model to the Korean labor market. The calibrated model is used to calculate the cost per job created by the hiring credit in different policy scenarios, from which the following findings arise. First, the cost per job created by the hiring credit would be lower when the credit is provided during specific periods only. Second, the cost per job created by the hiring credit would be lower when targeting a small subset of firms, or focusing on small businesses rather than large ones. Third, as the amount of the hiring credit increases, not only the number of jobs created but also the cost per job created by the credit increases. Lastly, whether the hiring credit is countercyclical or time-invariant rarely affects the cost per job, while forcing beneficiary firms to maintain employment levels for a certain period of time affects the cost per job in an ambiguous way.

This study investigates how state dependence in unemployment has changed since the COVID-19 outbreak, and derives policy implications to support the vulnerable in the labor market. We use the Economically Active Population Survey (2019-2022) to estimate state dependence in both parametric and nonparametric ways. There are three main findings. First, married women aged 35-49 and youth aged less than 35 experience a higher degree of state dependence in unemployment than high-educated men aged 35-49. Second, degrees of state dependence differ even among vulnerable groups, and dynamics of state dependence are different across them as well. Third, although point estimates obtained from a parametric model usually lie in the corresponding estimated identified sets obtained from a nonparametric model, state dependence among the unemployed tends to be overestimated under a parametric model. Based on these findings, we conclude that the authorities need to enhance the effectiveness of current policies for vulnerable groups by identifying what causes (and intensifies the degree of) state dependence.

The rise and persistence of the recent pandemic has made it necessary to rethink the social insurance system in Korea. This study explores how to fundamentally reform the social insurance system in Korea, especially focusing on policy strategies to improve the efficiency of social insurance administration and expand the social safety net. Examining previous studies on the integration of the social insurance system and investigating the cases of selected countries, we derive the following three policy implications. First, the discrepancy across social insurance programs is still substantial, despite efforts for the last two decades to standardize, for example, the social insurance contribution base. Second, in order to mitigate the administrative burden and respond to structural changes in the labor market, it would be essential to reduce the inconsistency across social insurance schemes and unify social insurance administration as much as possible. Third, rigorous inspection on the current unified system of collecting social insurance contributions is needed to design and implement a long-term reform plan for improving social insurance administration.