PhD Dissertation Research on Self-Employment in Korea

Between 2015 and 2020, I researched and wrote my dissertation on the Korean self-employment sector. Thanks to the direction of my advisor Professor Hwan-Joo Seo in the Department of Management Strategy at the Graduate School of Hanyang University, I was awarded a PhD in early 2021.

Because of the high priority I placed on doing the work in Korean, I published my previous studies in Korean journals. I hope this translated content will be useful for research outside Korea and contribute to a wider understanding of the Korean self-employment sector.

If I do not pursue further study in the field, this collection of work will serve as a logical endpoint for me. On the other hand, I can begin future efforts from this point if my motivation and availability don’t fade.  

Analysis of self-employment weakness in the Korean service sector using the concept of self-employment congestion

Steven S. Bammel

Department of Management Strategy, Graduate School of Hanyang University

PhD dissertation; awarded February 2021

Abstract

This study begins with a review of the self-employment literature to make the following informed assessment of weakness in the Korean self-employment sector. Three types of factors contribute to self-employment weakness: individual, structural, and miscellaneous. Because of these factors, the Korean self-employment sector suffers from three interrelated and overlapping patterns of weakness: 1) There are many weak self-employed workers who are not innovative or productive. 2) Overcompetition is widespread in business types where weak self-employed workers are concentrated. 3) Most weak self-employed workers are engaged in service businesses with limited innovation potential. While no established definition of weak self-employment exists, self-employment weakness is usually identified on the basis of four broad criteria: motivation, organizational size, financial results, and business type. Based on these criteria, the prior literature estimates the percentage of weak self-employed workers in Korea at between 5 and 25 percent of all Korean workers.

According to this study’s conceptual framework, weak self-employed workers do not build a business organization and do not earn much money but remain in the self-employment sector due to a lack of good employment opportunities in the wage-and-salary work sector. Under this study’s operational definition, weak self-employed workers are defined as non-wage-and-salary workers (both self-employed workers and unpaid family workers) working in the service sector who earn less than the average income for all job holders (both self-employed workers and salary and wage workers) and who do not have any paid employees. The author contends that an over-concentration of weak self-employed workers results in so-called “self-employment congestion,” which impedes overall development and productivity of the self-employment sector.  

The following results were obtained from a descriptive analysis of the Korean self-employment sector using Korea Labor and Income Panel Study (KLIPS) data for 1998-2018. First, in 2017, the self-employment congestion rate for the entire Korean service sector was 10.95%, a decrease of 1.50% from 1998. Second, the self-employment rate fell during this period, even as self-employment weakness rose. Third, self-employment weakness increased through the mid-2000s due to deteriorating self-employment income, but self-employment weakness has since remained steady. Fourth, in the overall economy, the data suggests that income has polarized to a limited extent between the self-employment sector and the rest of the labor market. In contrast, income polarization was not confirmed when narrowing the focus of analysis exclusively to the service sector. Fifth, self-employed workers enjoyed more opportunities in low-innovation business types than in mid- to high-innovation business types.

The following results were obtained using KLIPS data in a panel regression analysis that focused on work status. First, self-employment congestion in the service sector lowers earnings for both weak and non-weak self-employed workers, as well as wages and salaries for wage-and-salary workers, within individual service business types. Specifically, the negative effects of self-employment congestion in low self-employment congestion business types are more severe on less-successful self-employed workers; but the negative effects of self-employment congestion in high self-employment congestion business types are greater on more-successful self-employed workers, and especially on the top 10% of self-employed workers. The following results were obtained in a second panel regression analysis that focused on innovation patterns. First, self-employment weakness is worsening in Korean mid- and high-innovation service business types considered to have high innovation potential. This negatively impacts economic outcomes, as well as innovation, in these business types. Second, in low-innovation business types, the negative effects of increasing self-employment congestion are disproportionately suffered by relatively successful self-employed workers. Third, although the self-employment congestion rate in high-innovation business types is relatively low, the negative effects of increasing self-employment congestion on economic outcomes in these business types are higher than in other business types.

Keywords: self-employment, self-employment rate, self-employment congestion, self-employment congestion rate, self-employment weakness, self-employment weakness rate, service sector, weak self-employment, weak self-employed

Chapter 1. Introduction

. 1.1. Research gap

. 1.2. Composition of the study

. 1.3. Academic contribution of the study

Chapter 2. Self-employment and self-employment weakness

. 2.1. Self-employment rate overview

. 2.2. Self-employment weakness overview

. . 2.2.1. Weakness of the self-employment sector overall
. . 2.2.2. Weakness of the weak self-employment sub-sector

. 2.3. Factors of self-employment weakness

. . 2.3.1. Individual characteristics factors
. . 2.3.2. Structural factors
. . 2.3.3. Miscellaneous factors

. 2.4. Characteristics of Korean self-employment weakness

Chapter 3. Weak self-employment and self-employment congestion

. 3.1. Criteria of weak self-employment

. . 3.1.1. Start-up motivation
. . 3.1.2. Organizational size
. . 3.1.3. Financial performance
. . 3.1.4. Business type
. . 3.1.5. Other

. 3.2. Weak self-employment

. 3.3. Self-employment congestion

. 3.4. Comparative analysis of the self-employment congestion rate and self-employment rate

Chapter 4. Changes in Korean weak self-empployment

. 4.1. Size

. 4.2. Composition

. 4.3. Financial performance

Chapter 5. Economic impact of Korean weak self-employment

. 5.1. Impact by worker status

. 5.2. Impact by innovation type

Chapter 6. Conclusion

. 6.1. Summary of the study results

. 6.2. Significance and implications of the study

. 6.3. Limitations of the study and future study directions

Back matter

References

Appendices

These appendices are primarily based on content that is older and less developed than the main study. The first part of the appendix identifier matches the body section from which the appendix was referenced; the last number is the sequential order in which the respective appendix appeared in the section from which it was referenced. By way of example, Appendix 2.2.4. is the fourth appendix referenced in section 2.2.

1.1.1. Concepts and definitions of entrepreneurialism

1.1.2. A critical analysis of one method used in the Korean literature to estimate the optimal self-employment rate

2.1.1. Self-employment concepts, definitions, and terminology

2.1.2. Korean self-employment rate trends

2.1.3. Korean service sector weakness (2000–2015)

2.2.1. Heterogeneity in the self-employment sector

2.2.2. Glossary of terms related to weak self-employment in the extant literature

2.2.3. Informal sector and microenterprises/microfinance

2.2.4. Classifications used in the public sector for self-employment

2.2.5. Analysis of sosanggongin using two different data sets

2.2.6. Korean service self-employment innovation

2.3.1. Additional explanations about factors of weak self-employment

3.4.1 Classification of 27 service business types

4.1.1. Additional explanation about the KLIPS data

5.1.1. Additional statistical analysis results of the effects by worker status

5.1.2. Additional analysis results to support the robustness of the self-employment congestion rate (effects by worker status)

5.2.1. Additional statistical analysis results on effects by type of innovation

5.2.2. Additional statistical analysis results to support the robustness of the self-employment congestion rate (effects by type of innovation)



Other resources

Notes about the English translation

Glossary of important study terminology

Laws, other important documents, organizations, and datasets

Classifications and taxonomies