Globalization, Labor Market Flexibility and the Korean Labor Reform

Abstract

This paper addresses the question of labor market flexibility in Korea. It starts out with a conceptual discussion on different notions of labor market flexibility, identifying market-driven flexibility and strategic behavior-driven flexibility as two basic alternatives. It is then argued that globalization tends to create pressures toward market-driven flexibility, with mixed and uncertain results. Finally, reviewing evidence on labor market flexibility and the saga of the recent law reform, this paper suggests a need to devise a systematic approach to move toward strategic behavior-driven flexibility.