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  • P-ISSN 1738-656X

한국개발연구. Vol. 14, No. 4, December 1992, pp. 79-106

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The Determinants of Wage Premium (Written in Korean)


Author & Article History

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This study analyzes the determinants of wage premium, defined as the excess of actual wage rate over opportunity wage, for the average worker in a Korean bargaining unit. Average wage premium of a firm is decomposed into quasi-rent per worker and rent-sharing rule. Per capita quasi-rent, representing a firm's ability to pay, is defined as the difference between sales revenue and the opportunity cost of mobile factors, divided by the number of employees. Rent-sharing rule, a measure of workers' bargaining power, is defined as the average wage premium divided by the per capita quasi-rent. Empirical results show that the differences in wage premium among Korean bargaining units are much better explained by the differences in quasi-rent than by the differences in bargaining power. Also, comparing the results of 1986 with those of 1988 show that the wage settlement mechanism in 1988 was not quite different from that of 1986, in spite of the drastic change in industrial relation system in 1987. It may simply yield higher opportunity wages, by raising the bargaining power of overall workers. The tendency of Korean labor market in 1988 to show a dual structure of high & low wage premium sectors, is not due to the fact that the differences in bargaining powers across firms tend to expand, but to the fact that unions tend to reduce the wage differences among the workers within an enterprise by pursuing more equal distribution of total wage premium. Hence, the policies for reducing the wage differentials across firms should focus on rent-regulating industrial policies, e.g. eliminating monopoly rents by deregulation.

JEL Code

J31, J50, J30

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