Working Paper: NBER ID: w3012
Authors: Takatoshi Ito; Kyoungsik Kang
Abstract: This paper examined the bonus and wage behavior in Korea. We found that both bonuses and wages in Korea respond to economic conditions much more than their counterparts in Japan. This finding may reflect the fact that the Korean labor market is much closer to a spot market rather than a long-term contract (lifetime employment) market. Hence the bonus/wage ratio is apparently insensitive to economic conditions in Korea, unlike in Japan (Freemand and Weitzinan). When "overtime" component of the wage is separately examined, it responds to economic conditions less than bonuses but more than base wages.
Keywords: bonuses; overtime; employment; Korea; Japan
JEL Codes: J30; J31; J32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Bonuses in Korea (M52) | Economic conditions (E66) |
| Wages in Korea (J31) | Economic conditions (E66) |
| Bonuses in Korea respond more significantly to economic conditions than wages (J33) | Bonuses function as a mechanism for profit sharing (J33) |
| Bonuses respond positively to profits (J33) | Profit-sharing hypothesis (G35) |
| Bonuses respond positively to value added (M52) | Profit-sharing hypothesis (G35) |
| Overtime component of wages responds less to economic conditions than bonuses (J33) | Hierarchy of responsiveness among compensation components (M52) |
| Overtime component of wages responds more to economic conditions than base wages (J33) | Hierarchy of responsiveness among compensation components (M52) |
| Lack of statistical significance for profits on the bonus-wage ratio (D33) | Challenges the idea that bonuses are merely a disguised form of wage (J33) |