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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 18, No. 2, pp.87-123
ISSN: 1225-0279 (Print)
Print publication date 31 May 2005
Received 24 Mar 2005 Revised 15 Apr 2005

Growth in College Education and Wage Differentials in Korea

Dae Il Kim
Associate Professor, School of Economics, Seoul National University, San 56-1 Shilim-dong, Kwanak-gu, Seoul 151-742, Korea dikim@snu.ac.kr

JEL Classification: J31, J24

Abstract

This paper investigates how overall wage structure has responded to changing labor supplies in Korea between 1978 and 2002, with the main emphasis on changes in educational and age distributions of labor supply during the period. These supply changes mostly reflect ever-increasingly educated new cohorts of varying sizes, and it bears critical importance in understanding the labor market mechanism to see how these entry-level changes are absorbed in Korea's market. The main findings are as follows. Both educational upgrading and changing cohort sizes, despite being entry-level changes, have a strongly common effect on all age groups in such a way that their wages highly co-move. The commonness in wage movements arises because workers of varying ages are good substitutes for each other within education. Age structure of wages has relatively been stable within each education, implying that there exists almost a single wage rate within education. Consequently, the time-series patterns of college premiums are accounted for mostly by changes in the single prices. In addition, differences in cohort-specific productivities between high-school and college graduates account for some of the remaining variations.

Keywords:

College premium, Substitutability, Cohort effects

Acknowledgments

This paper was partly written when the author was visiting the NY State School of Industrial and Labor Relations(ILR) at Cornell University. I gratefully acknowledge financial support from the Advanced Strategy Program(ASP) of the Institute of Economic Research at Seoul National University. I am grateful to Gyeongjoon Yoo for helpful comments and data and to an anonymous referee for helpful comments. All remaining errors are mine.

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