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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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1. What can Job Training do? Is University the Sole Way of Life? – The Effects of School Education and Job Training on Wages in Korea 25

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25 1. What can Job Training do? Is University the Sole Way of Life? - The Effects of School Education and Job Training on Wages in Korea - Abstract In contradistinction to Becker’s human capital theory, more educated university graduates in Korea suffer from high unemployment. In spite of this fact, the de- sire to go on to university continues to grow and any job related education and training are neglected. This study aims to find the reason behind this bias in Ko- rea concerning human capital investment. Employing the data taken from the ‘Korean Labor and Income Panel Study (KLIPS),’ the study estimates the ef- fects of school education and job training on wages by means of the random ef- fects and Heckman 2 step methods. The finding is that the effects of a university education on wages are much more profound than those of lower educational levels. The effect of job training turns out to be marginal compared with the ef- fect of school education. This tends to lead Koreans to invest so much in school and university education whilst holding job training in low esteem. Keywords: School education, Job training, Human capital, Wages 1.1. Introduction In 2008, 83.8% of all high school graduates went on to university or junior col- lege in Korea. This number is more than five times as high as it was in 1980. However, only 76.7% of graduates from all tertiary educational institutions and merely 69% of general university graduates found a...

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