Journal of Economic Theory and Econometrics: Journal of the Korean Econometric Society

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Journal of Economic Theory and Econometrics
Journal of the Korean Econometric Society

Volume 25, Issue 2 (June 2014)

Cover Pages
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An Empirical Analysis of the Effects of a Change in Market Structure on Production and Employment in the Korean Economy, Pages 1–39

Bae-Geun Kim

Abstract | PDF (2424 kilobytes)

This paper examines the effects of a change in market structure on production and employment. Changes in market structure are captured by variations in the markup ratio, which is the degree of imperfect competition in product markets. First of all, this paper finds that the markup ratio in the Korean economy is relatively high among the OECD countries, which implies that domestic product markets are much concentrated. The paper also estimates the effects of a rise in the markup ratio on production and
employment in the Korean economy by using structural vector autoregressions that can identify a permanent markup shock. The results show that a permanent rise in the markup ratio lowers both production and employment. Moreover, when the analysis is carried out for the manufacturing and service sectors, the same results can be found even at the sectoral level. The empirical findings of the paper suggest that reducing the degree of market concentration is important in raising both economic efficiency and employment.

The Costs of Business Cycles with Market Incompleteness I, Pages 40–59

Hyung Seok E. Kim, Joon Hyoung Kim

Abstract | PDF (1059 kilobytes)

This paper re-examines the welfare costs of busness cylces with market incompleteness. We show that the consideration of limited asset market participation in a real business cycle model makes it possible for welfare costs to increase substantially in response to business cycle risks. A high Sharpe ratio, i.e. the risk-return trade-off in financial markets is key to generating welfare estimates two orders of magnitude larger than Lucas (1987)'s ones.

The Effects of Labor Composition on Hours Volatility: Evidence from the U.S., Pages 60–84

Hye Mi You

Abstract | PDF (195 kilobytes)

For the past few decades, labor composition has changed drastically in the U.S. This paper examines how these changes help to explain the recent decline in aggregate hours fluctuations. I disaggregate workers by gender, education, marital status, and spousal characteristics among married
workers, and quantify the impact of their changing shares on cyclical volatility of hours at both the extensive and intensive margins. The main result is that these labor composition changes explain little of the reduction in hours volatility along the extensive margin, yet they explain a significant fraction of the fluctuations at the intensive margin. Educational attainment is the single most important factor in aggregate hours fluctuations: it accounts for 1% and 14% of cyclical volatility of employment rate and average weekly hours, respectively. I also find that spousal education among married workers with a working spouse played an important role in the phenomenon.

Decomposing Volatilities and Asymmetries in Unemployment: the Ins versus the Outs, Pages 85–119

Kangwoo Park

Abstract | PDF (2083 kilobytes)

Applying Shimer's (2012) measurement method to the Economically Active Population Survey data(1986Q1-2011Q4) in Korea, we estimate the unobserved job separation and finding rate, with which we decompose unemployment fluctuations into the parts driven by two labor flows: inflows to unemployment(the Ins) and outflows from unemployment(the Outs). Furthermore, we estimate the relative contributions of each flow to unemployment volatility (variance) and asymmetry(skewness), and the same analysis is implemented on unemployment data by age.

Main findings are as follows: First, both the volatility and asymmetry of job separation rates predominate over those of job finding rates. Second, while in the medium and long run, both rates contribute remarkably to asymmetric movements of unemployment, the short-run asymmetry in unemployment fluctuations mainly originates from significant positive skewness in job separation rates. Third, the decomposition analyses confirm that in terms of both volatility and asymmetry, inflows to unemployment play a more dominant role in explaining unemployment fluctuations than outflows from unemployment do. Finally, decomposing unemployment rates by age, we find that the relative contributions of job finding rates are inversely related to the ages of the unemployed.


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