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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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2. Effects of School Education and Job Training on Earnings in Korea and Germany. A Comparative Study 75

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75 2. Effects of School Education and Job Training on Earnings in Korea and Germany. A Comparative Study � � Abstract Researchers in Korea have advanced the hypothesis that the earnings gap be- tween university graduates and those with lower levels of education is higher in Korea than in Germany due to German job training reducing the earnings gap between educational levels. This lessens competition for university entrance in Germany. This study estimates earnings differentials between educational levels and job training for both countries using the 2002-2007 dataset comprised of male employees taken from the ‘Korea Labor and Income Panel Study’ and ‘German Socio-Economic Panel’. Utilizing quantile regression method, this study repudiates the hypothesis: Earning differentials between education levels are higher in Germany than in Korea, although German job training compen- sates for these differentials more strongly than Korean job training. Keywords: School education, Job training, Human capital, Earnings, Korea, Germany 2.1. Introduction According to educational indicators supplied by the OECD, the rate of entry to university for the relevant aged-cohort in the population in 2006 was 35% in Germany. In the same year, this entry rate reached 59% in Korea (OECO (2008)). The relatively high entry rate to university in Korea has its downsides however. While the unemployment rate of university graduates was about 1% in Germany, the percentage of the unemployed who graduated from a university among all the registered unemployed was 12.6% in 2000, 17.1% in 2004, 19.5% in 2007 and 22.04% in 2009 in Korea (Kolja Briedis (2009)...

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