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BOK Working Paper No.2018-38, Dual Labor Markets and Labor Productivity: Evidence from the OECD countries

Economic Research Institute (82-2-759-5470) 2018.12.03 2852

Title : Dual Labor Markets and Labor Productivity: Evidence from the OECD countries

Author : Chung Choe(Hanyang University ERICA), Koangsung Choi(Hanyang University), Jieun Lee(BOK)


<Abstract>


This paper examines the impact of the dual labor market structure on labor productivity using unbalanced panel data of 29 OECD member countries over the sample period from 1990 to 2015. By using a variety of regression models for panel data (e.g., pooled regression, a fixed effects model and the generalized method of moment), we focus on how the changes in composition among temporary, permanent and self-employed (non-salaried) workers contribute to productivity growth. Although the results slightly differ depending on the estimation method, we find that an increase in the share of permanent workers has the greatest effect in increasing productivity growth. More specifically, productivity growth is significantly slowed by the use of temporary instead of permanent workers, whereas there is little difference in productivity growth when replacing permanent with self-employed workers. This result suggests that an increase in the use of temporary workers could have an adverse effect on labor productivity.

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