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Essays on Labor Market and Human Capital – Korea and Germany

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Mee-Kyung Jung

Since 2004, more than 80% of all high school graduates in Korea went on to university or at least junior college, although higher educated people suffer more seriously from unemployment. In human capital theory, reducing the unemployment rate when increasing the level of education was determined to be a stylized fact. But the current situation in Korea does not justify the theory. Using the Korean Labor and Income Panel Study and the German Socio-Economic Panel three empirical essays aim to find the corresponding reasons and solutions. Koreans’ strong interest in university studies could be caused by lack of promising alternatives. An enhancement of the job training system along German lines seems to offer a reasonable solution to the oversupply of university graduates in Korea.

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General Introduction 17

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17 General Introduction Excessive competition for university entrance is a very serious problem in Ko- rea1. Since 2004, more than 80% of all high school graduates have gone on to university or junior college. In 2008, this reached 83.8%, although only 76.7% of graduates from all tertiary educational institutions found a job. Only 56.1% of all graduates have a regular job (Korean Educational Development Institute (2009)). The percentage of the unemployed who graduated from a university was 12.6% among all the registered unemployed in 2000, 17.1% in 2004, 19.5% in 2007 and 22.04% in 2009 (Korean Statistical Information Service (2010)). In spite of this fact that more highly educated people suffer more seriously from unemployment, the desire to go to university still keeps growing in Korea. On the other hand, the number of vocational high school graduates continues to fall. Job training is generally neglected in Korea. In human capital theory, as developed by Becker (1962, 1964), a positive corre- lation between earnings and the level of skills − school education and on-the-job training − and the reduction of the unemployment rate with the increasing level of skills was determined to be the stylized fact of human capital investment. However, the current situation in the Korean labor market does not serve to jus- tify this theory of human capital. In studying the contradiction between theory and reality in Korea, this study seeks to uncover some reasons behind the biased behavior of Koreans concerning human capital investment, which focuses too much on university...

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