Labor Market Slack and the Output Gap: The Case of Korea
IMF Working Papers, August 2, 2019
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- Labor Market Slack and the Output Gap: The Case of Korea
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Bibliographic details
- Authors: Niels-Jakob H Hansen, Joannes Mongardini, Fan Zhang
- Published: August 2, 2019
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513508344.001
Authors and Publication
- By Niels-Jakob H Hansen, Joannes Mongardini, Fan Zhang
- August 2, 2019
- IMF Working Papers, Working Paper No. 2019/167
- Pages: 23
- Volume: 2019
- Issue: 167
- DOI: https://doi.org/10.5089/9781513508344.001
- Stock No: WPIEA2019167
- ISBN: 9781513508344
- ISSN: 1018-5941
Core research question and motivation
- Output gap estimates are widely used to inform macroeconomic policy decisions, including in Korea.
- The main determinant of these estimates is the measure of labor market slack.
- The traditional measure of unemployment in Korea yields an incomplete estimate of labor market slack because many workers prefer involuntary part-time jobs or leaving the labor force rather than registering as unemployed.
Key findings
- A broader measure of unemployment that accounts for involuntary part-time work and discouraged/leaving-the-labor-force behavior provides a more accurate measure of labor market slack.
- Using this broader measure as an input into a multivariate filter produces a more meaningful measure of the output gap.
Methodology overview
- The paper discusses how to broaden the unemployment measure in Korea.
- The broader labor market slack measure is then used to estimate the output gap using a multivariate filter (MVF).
Subjects and keywords
- Subjects: Capacity utilization, Labor, Labor markets, Output gap, Potential output, Production, Unemployment
- Keywords: Capacity utilization, discouraged worker, Global, labor force, labor market condition, labor market resource, labor market slack, labor markets, Output gap, output gap estimate, output gap from the MVF, persistent output gap, Potential output, Unemployment, WP
Practical implications for policy and analysis
- Improved measurement of labor market slack can change the estimated output gap, which in turn can affect macroeconomic policy decisions for Korea.
- Accounting for involuntary part-time employment and labor force non-participation yields a labor market slack indicator better suited for multivariate filtering techniques used to estimate potential output and the output gap.
Source: IMF Working Paper "Labor Market Slack and the Output Gap: The Case of Korea", IMF Working Papers 2019, 167 (2019).
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- Working Paper