Implications of National and Regional Employment Dynamics for Korea

Abstract

This paper investigates the relationship between regional and national employment for Korea for the period 2004-2017. The data show that regional and national employment are not as closely related as expected. The employment growth of a region does not move in the same direction as the national employment growth rate. We analyze the regional employment growth data by industry and try to find factors that can explain discrepancies between national and regional employment growth. The analysis shows that the substantial variations in regional employment growth can be explained by the different response to employment change at the national level and to change in a region’s share of industry. Employment in some regions is tightly synchronized with national employment and their employment changes are also caused by changes in their industry share. The results suggest that the magnitude of the response to each factor is quite different across regions, which can explain cross-regional employment changes for a given period. Our decomposition results suggest that in some regions, employment and industry factors both play significant roles in deciding the employment change. The different employment responses to national employment change and changes in industry share provide some insights for policymakers. Regions whose employment is synchronized with national employment should design a policy that can smooth the effects caused by national employment changes or by business cycles.