Returns to Tenure and Labor Market Mobility in Korea

In this paper, I estimate the returns to tenure of the Korean labor market and investigate the relationship between returns to tenure and labor mar-ket mobility. I begin with the two methods introduced by Altonji and Shakotko (1987) and Topel (1991) to estimate returns to tenure in Korea and the US using panel data sets and confirm that both returns to tenure and job mobility are higher in Korea. Next, the industry- and occupation-wise returns to tenure are estimated for Korea and are found to be widely variable across different divisions. Finally, the correlation coefficients between returns to tenure and job mobility among in-dustries and occupations are estimated and show almost zero or slightly positive correlations. These patterns contradict the conventional wisdom, which predicts a negative correlation, and suggest the possibility that returns to tenure work as an incentive device to retain workers in Korea.