R&D Investment, Job Creation, and Job Destruction in Korea : Technological Progress and Labor Market Equilibrium

If technical advances are of a form that can be utilized by existing plants, then investors will be encouraged to create new plants (the “capitalization effect”), which will, in turn, create more vacancies and hire more workers. If technical progress occurs at a very fast pace, however, the proportion of workers released from production units will be high and leads to job destruction (the “creative destruction effect”). We tested several propositions and implications for labor market equilibrium of Schumpeterian growth theory against the data of the Korean economy. When we examine the results of our estimations and others tests, we find that the evidence suggests that the capitalization effect of growth on unemployment has been dominant in the Korean economy in the past through the labor market variables. The difference of this study from Kim (2007) is that we consider diverse market variables like separation rate, job-finding rate and unemployment rate through estimation. We can find significant relationships between market variables and technology accumulation (R&D). Finally, recent “jobless growth” may be due to very little capitalization effects of productivity growth.