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Labor Market Rigidity at Home and Multinational Corporations’ Flexible Task Reallocation Abroad (English)

An unprecedented regime change following the 2017 presidential impeachment led to a dramatic shift to more rigid labor market policies in the Republic of Korea, represented by consecutive double-digit hikes in the minimum wage in the next two years. Using a firm-level data set with detailed information about foreign affiliates for 2013~19, this paper assesses the employment consequences of stricter labor market regulations. The empirical evidence uncovers a relatively unexplored mechanism through which domestic labor market rigidity can potentially reduce domestic employment as multinational firms with flexible internal networks reallocate tasks across borders.

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Citation

Ahn,Jaebin Choi,Jaerim Chung,Sunghoon

Labor Market Rigidity at Home and Multinational Corporations’ Flexible Task Reallocation Abroad (English). Policy Research working paper ; no. WPS 10114 Washington, D.C. : World Bank Group http://documents.worldbank.org/curated/en/099558206292225157/IDU081e65d43046c7049fa09ee2063cd30a05a4b