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The impact of Corruption on the Labor Market
The impact of Corruption on the Labor Market
  • Table of Contents

    Chapter 1. Introduction

    Chapter 2. The Literature on the Impact of Corruption on Business and Economic Performance

    Chapter 3. Results of Corruption Perception Survey by Industry

    Chapter 4. Impact of Corruption on Employment and Human Capital Investment of Business

    Chapter 5. Conclusion 

  • SUMMARY

    This study aims to perform an empirical analysis into how much negative impact corruption has on labor market. The scope of corruption in the context of this study is the relations between politically connected authorities and businesses, such as illegal lobbying activities involving political connections.

    To this end, a quantitative analysis was conducted into the repercussions of corruption on the quantity and quality of employment and investment in human capital at the firm level, as well as the overall labor market. The results are used to identify and propose empirical facts about how employment outcomes are influenced by anti-corruption policies in the public sector and voluntary efforts for improvement in the private sector.

    The analysis utilized data from the Human Capital Corporate Panel Survey of the Korea Research Institute for Vocational Education and Training in addition to the results from a survey on corruption perception by industry. Key dependent variables are those that indicate the quantity and quality of employment, namely the total number of employees and regular workers in the company. The variable for human capital investment is the total annual budget for education, training, and welfare benefits. The key explanatory variable is the level of corruption perception in the industry that the company belongs to, which was based on the data collected through a separate questionnaire survey for this study.

    The analysis has found that companies in the industry with lower corruption perception have a statistically significant tendency to have a higher number of total employees. A basic model analysis shows that a 1% increase in corruption perception in the industry that a company belongs to translates into a 1.05% increase in the total number of employees in the company. This implies the possibility that companies in the industry with lower corruption perception have a significantly bigger potential to increase employment.

    When considering both the quantity and quality of employment, there was a statistically significant impact of corruption perception by industry on the number of regular workers in a company. A basic model estimation shows that a 1% increase in corruption perception in the industry that a company belongs to translates into a 1.15% increase in the total number of regular workers in the company. This implies the possibility that improving corruption perception by industry can contribute to enhancing the quality of employment by increasing the ratio of regular workers among total employees.

    We have also analyzed how company’s investment in human capital, or current employees, is affected by the changing level of corruption perception in its industry. The analysis is based on the annual budget for education, training, and welfare benefits. A negative relationship was found in that the lower the level of corruption perception in an industry, the lower the company’s expenditure for education, training, and welfare benefits. This relationship was statistically very significant when control variables related to the number of employees and financial conditions were included.

    The results show that when companies in Korea can choose from two options of hiring more people or investing more in current employees due to the low level of corruption in its industry, most show a tendency of focusing on the first option and investing relatively less in the second option.

    Implications of this study can be summarized as follows.

    Firstly, corruption has a significantly negative impact on labor market, both in terms of the quantity and quality of employment. Considering the impact of corruption on labor market that is directly linked to the daily lives of Korean people, there is a dire need for greater anti-corruption policy efforts.

    Secondly, the government’s anti-corruption policies can have an unintended consequence of decreasing companies’ human capital investment such as education, training, and welfare benefits for current employees, despite the fact that such policy efforts, coupled with the voluntary improvement actions of the private sector, can positively influence the labor market and the overall economy.

    Thirdly, a survey of experts in various fields on the level of corruption perception found almost no difference in corruption perception by industry depending on specific attributes of the group such as the respondent’s scope of activity, age, or gender. This indicates that the industry perceived to have a high level of corruption clearly have urgent problems to be addressed compared to their counterparts.

     

Se-Um Kim's other publications : 11
{Research Series} posts
No Title Author Date Attach
11 The impact of Corruption on the Labor Market Se-Um Kim December 28, 2018 The impact of Corruption on the Labor Market
10 Comprehensive Evaluation of the Youth Labor Market Policy: Literature Review Seung-Yeol Yee, Se-Um Kim, Jin-Young Kim, Jae Min Seong, Sun Jung Oh, Min-Ki Hong December 29, 2017 Comprehensive Evaluation of the Youth Labor Market Policy: Literature Review
9 Prospects for the Impact of Expanding Protectionism on Labor Market Se-Um Kim December 30, 2016 Prospects for the Impact of Expanding Protectionism on Labor Market
8 Post-Secondary Education in Korea and Its Effects on the Labor Market Sun Jung Oh, Se-Um Kim December 30, 2016 Post-Secondary Education in Korea and Its Effects on the Labor Market
7 Exploring Alternative Labor Regime: The Three Decades Since 1987, the Structure and Dynamics in the Korean Labor Regime Hong Geun Chang, Se-Um Kim, Keun ju Kim, Heungjun Jeong, Joonsik Park December 30, 2016 Exploring Alternative Labor Regime: The Three Decades Since 1987, the Structure and Dynamics in the Korean Labor Regime
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