Politická ekonomie 2024, 72(1):122-141 | DOI: 10.18267/j.polek.1410

Unemployment and Labour Force Participation in South Korea: Johansen-Type Cointegration Analysis with a Fourier Approach

Veli Yilanci ORCID..., Onder Ozgur ORCID...
Veli Yilanci: Faculty of Political Sciences, Çanakkale Onsekiz Mart University: Çanakkale, Turkey, e-mail: veli.yilanci@comu.edu.tr
Onder Ozgur: (corresponding author), Faculty of Political Sciences, Ankara Yildirim Beyazit University, Ankara, Turkey, e-mail: oozgur@aybu.edu.tr

This study examines the long-run relationship between the unemployment rate and labour force participation rate in South Korea from June 1999 to January 2023. The study utilizes the traditional Johansen cointegration test and augments it with Fourier terms to control for an unknown number of breaks in the cointegration system. The empirical findings suggest a significant long-run relationship between the unemployment rate and labour force participation rate in South Korea, which provides evidence against the unemployment invariance hypothesis. The study also finds evidence of the discouraged-worker effect for males and the added-worker effect for females. The findings of this study have important implications for policymakers in creating more effective plans to lower unemployment and foster economic growth in South Korea. This study contributes to the literature by clarifying the validity of the unemployment invariance hypothesis in the South Korean economy, which is regarded as a growth miracle in the literature. Instead of using the standard configuration of dummy variables, the Johansen cointegration technique now has the ability to adjust for an unknown number of multiple structural breaks in the cointegration system.

Keywords: Unemployment rate, labour force participation rate, unemployment invariance hypothesis, cointegration, Fourier approximation, structural breaks, Korean labour market
JEL classification: E24, J64, O53

Received: April 22, 2023; Revised: August 12, 2023; Accepted: August 21, 2023; Prepublished online: January 31, 2024; Published: February 27, 2024  Show citation

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Yilanci, V., & Ozgur, O. (2024). Unemployment and Labour Force Participation in South Korea: Johansen-Type Cointegration Analysis with a Fourier Approach. Politická ekonomie, 72(1), 122-141. doi: 10.18267/j.polek.1410
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