Wages, income distribution, and gender in South Korean export-led growth

This research investigates the role of wages, income distribution, and gender in South Korean growth. Three major analyses are conducted for the 1970s and 1980s: a neo-Kaleckian/structuralist macroeconomic model is developed to examine the impact of shifts in income distribution on output and growth; econometric analyses of hypotheses generated by the model are carried out; and a gender analysis investigates the degree of occupational segregation and wage inequality by gender, and assesses the impact of gender wage differentials on export-led growth. The comparative static results of the model indicate that a semi-open, semi-industrialized economy may be wage-led (higher wages stimulate growth and output) under some conditions. The economy is more likely to be wage-led if there is a structural dependence on imported intermediate and capital goods, import restrictions, or limits on capital mobility. Also, equity and growth may be compatible if firms respond to higher wages by increasing investment in labor-saving technology, and if saving out of profits exceeds saving out of wages. Econometric analysis, used to estimate the structural equations of the model, provides evidence consistent with the hypothesis that the South Korean economy has wage-led characteristics, and indicates that this feature is more pronounced in the 1980s. The investigation into gender-based wage inequality in the manufacturing sector indicates that women are occupationally segregated into low-wage export industries with low wages positively correlated to the share of women workers in an industry. Gender-based wage discrimination is found to be positively related to export growth in the 1970s. This relationship is found not to hold in the 1980s, which may be attributable to a shift in the export mix to goods in which quality matters, thereby permitting the payment of efficiency wages to women. These results suggest that income distribution plays an important role in the macroeconomy, with wage increases in South Korea in the 1980s having a positive impact on growth and output. The gender analysis supports the view that the role of wages is not static and depends in part on economic structure.