The Effect of Entry Regulation and Firm Size on Net Job Creation in the Korean Service Industry

이병기; Ki Bum Noh

The present study addresses two issues important to job creation in the Korean service industry: the effect of entry regulations and firm size in generating jobs. Studies in other countries have shown that various types of entry regulations act as strong deterrents to entry into new markets in that they hinder job creation. Many such regulations currently exist in the Korean service industry. In spite of the important impact of such regulations, little research has been done on the effect of Korean entry regulations on job creation. The present study addresses the impact of such regulations on net job creation. A second point of controversy is the correlation between firm size and job creation: We therefore also examined the effect of business size on net job creation after controlling for the firm age . For our empirical analysis, we applied employment weighted least squares regression after generating a saturated dummy variable model using data from the annual Korean Establishment Census for the years 2000 through 2012. Our study shows that sectors in the service industry without entry regulations result in higher net job creation than those with entry regulations. As to our second inquiry, we found that the bigger the company, the higher the net job creation. These findings indicate that to the extent that entry regulations can be reduced, net job creation can be expected to go up. They further suggest that Korean job-creation policy should provide incentives for large businesses and more incentives for new businesses rather than focusing exclusively on small and medium size businesses, as it now does.

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* 2021년 이후 발행 논문의 참고문헌은 현재 구축 중입니다.

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