Research
Publications (JIF = 2015/2014 Journal Impact Factor)
[1] "Threat of Dismissal: Incentive or Sorting?", Journal of Labor Economics, 2005, 23 (4), 797-838 [download] (JIF=3.214)
(Abstract)
"Many people are fired from their jobs for poor performance. However, it is difficult to distinguish whether they are fired because they are not well suited for their job (sorting explanation) or because the firms are trying to provide incentives for effort (incentive explanation). This article develops a dynamic incentive model of dismissal and proposes a methodology to distinguish between these two explanations. The methodology is based on learning-by-doing and changes in the slope of dismissal probability with respect to tenure. Using personnel data from a large U.S. company, this study finds significant evidence for the incentive explanation."
[2] "Optimal Contract for Long-term Decisions and Threat of Dismissal", Journal of Economics & Management Strategy, 2006, 15 (3), 735-761 [download] (JIF=0.823)
(Abstract)
"This paper studies a simple agency model where an agent's decision can affect his or her own future payoffs as well as the principal's. The threat of dismissal becomes an important part of an incentive scheme even if the principal can use the performance-based wage contract. However, if the agent's future payoffs depend on the past realized performance, but not on the past decision directly, or if the agent is risk-neutral, it is not optimal to use the threat of dismissal. As the agent's discretion over his future payoffs increases, the principal relies more on the threat of dismissal but less on the wage contract."
[3] "Incentives, Wages, and Promotions: Theory and Evidence", Rand Journal of Economics, 2006, 37 (1), 100-120 [download] (JIF=1.582)
(Abstract)
"I study an incentive problem that has been largely ignored in the agency literature: incentives for repeated (human capital) investment. The optimal contract is very simple but still provides rich implications for incentive and wage structures in large organizations. The empirical evidence is presented using personnel records of health insurance claim processors in a large U.S. insurance company. These processors are white-collar, nonmanagerial, female, service industry workers—a rapidly growing but rarely studied labor group. The empirical findings are consistent with the main features of the optimal contract."
[4] "Endogenous Favoritism in Organizations", Topics in Theoretical Economics, 2006, 6 (1), Article 10 (https://doi.org/10.2202/1534-598X.1273) [download] (JIF=0.412)
(Abstract)
"This paper shows that favoritism can arise endogenously as an optimal decision rule in a symmetric model with an ex-ante impartial principal. Furthermore, favoritism dominates fairness specifically when the favorite promotes his own idea and ignores the other's idea so that the non-favorite loses motivation. Our model also provides new insights on hierarchical communication structure and group authority."
[5] "Overstatement and Rational Market Expectation" with Eunjung Yeo, Economics Letters, 2009, 104 (1), 9-12 [download] (JIF=0.603)
(Abstract)
"When an agent overstates his/her true performance, a rational market can still correctly guess the true performance. This paper shows, however, that such rational market expectation and a profit-maximizing principal can exacerbate the lack of productive effort by the agent."
[6] "R&D Portfolio and Market Structure", The Economic Journal, 2010, 120 (543), 313-323 [download] (JIF=2.37)
(Abstract)
"This article analyses how firms allocate their resources when they compete for multiple patents in heterogeneous research projects simultaneously. A simple model shows that firms' resource allocation is biased away from risky and basic research, even when imitation is not possible and firms are fully rational. Therefore a market may lack major innovations despite large aggregate research expenditure and strong patent protection. This article also shows that as a market becomes more competitive, firms invest relatively less in basic research but more in risky research. These results provide a novel explanation for an ambiguous empirical relationship between innovation and market concentration."
[7] "Cohort Effects in Promotions and Wages: Evidence from Sweden and US" with Eva Meyersson Milgrom and Seiwoon Hwang, Journal of Human Resources, 2010, 45(3), 772-808 [download] (JIF=2.371)
(Abstract)
"This paper studies the long-term effects of the business cycle on workers’ future promotions and wages. Using the Swedish employer-employee matched data, we find that a cohort of workers entering the labor market during a boom gets promoted faster and reaches higher ranks. This procyclical promotion cohort effect persists even after controlling for workers’ initial jobs, and explains at least half of the wage cohort effects that previous studies have focused on. We repeat the same analyses using personnel records from a single U.S. company, and obtain the same qualitative results."
[8] "Patent Portfolio Race and Secrecy," Journal of Industrial Economics, 2012, 60(3), 499-516. [download] (JIF=1.058)
(Abstract)
"Firms do not always patent their innovations. Instead, they often rely on secrecy to appropriate the returns of innovations. This paper endogenizes firms’ patent propensity, and shows that when the equilibrium patent propensity is small, strengthening patent protection can decrease firms’ incentive to innovate. Paradoxically, this result holds precisely when a stronger patent policy induces more patent applications. Also, these results can arise even in the simplest patent race model with independent innovations as well as with complementary innovations."
[9] "Risk-taking in Subjective Promotion Tournaments" - Applied Economics Letters, 2013, 20(13), 1238-1243 [download] (JIF=0.378)
(Abstract)
"This article considers a promotion tournament where the winner is decided by the principal's posterior belief about the agents’ abilities, called a subjective promotion tournament. If the agents can choose the risk of their performance as well as their effort, this article shows that such a subjective tournament can be better than an objective tournament where the winner is decided by the agents’ verifiable performance measures only. This is because the subjective tournament leads to lower uncertainty about the agents’ abilities and a higher level of agents’ effort, thereby providing better sorting and incentive effects."
[10] "Motivation, Discretion, and Corruption," Journal of Public Administration Research and Theory, 2014, 24(3), 765-794 [download] (JIF=3.893)
(Abstract)
"Increased monitoring, higher wages, and less discretion are some of the generic remedies for corruption. However, these remedies can be expensive, and may reduce bureaucrats’ public service effort and increase corruption. A theoretical model shows that extrinsic motivation for public service (e.g., performance pay) can reduce corruption without some of these side effects. Using a unique survey on 800 central government bureaucrats in Korea, this article also provides individual-level micro evidence that is largely consistent with the predictions of the theoretical model. Interestingly, the evidence suggests that bureaucrats’ intrinsic motivation (e.g., public service motivation) is as negatively associated with their corruptibility as extrinsic motivation. Also, bureaucrats’ frequent contact with civil organizations is negatively associated with their corruptibility, whereas frequent contact with the media is positively correlated with corruptibility."
[11] "The Significance of Firm and Occupation Specific Human Capital in Hiring and Promotion" (with Eva Meyersson Milgrom) - Labour Economics, 2014, 31, 162-173 [download] (JIF=0.899)
(Abstract)
"This paper analyzes firms' hiring and promotion patterns, and infers the relative significance of the firm- and occupation-specific human capital required for each job rank. The results suggest that firm-specific skills are just as valuable as occupation-specific skills, and that the value of these specific skills increases in job rank. However, there is great heterogeneity across occupations. This paper also shows that the lengths of firm- and occupation-tenure are noisy measures of firm- and occupation-specific human capital, and contrasts our results with those of other recent studies on the returns to firm- and occupation-tenure for wages."
[12] "Information Disclosure and Peer Effects in the Use of Antibiotics" (with Daesung Jun), Journal of Health Economics, 2015, 42, 1-16 [download] (JIF=2.339)
(Abstract)
"Mandatory information disclosure may allow sellers to observe and respond to other sellers’ attributes (seller peer effects) as well as informing consumers of the sellers’ attributes (consumer learning effect). Using the data from mandatory information disclosure of antibiotic prescription rates for the common cold in Korea, this paper shows that while average prescription rates decreased after the disclosure, more than 30% of the clinics increased their antibiotic prescriptions. Moreover, clinics that were prescribing relatively fewer antibiotics than other local clinics before the disclosure requirement were more likely to increase their prescription rate. The average prescription rates also declined less in markets with stronger clinic competition. These results are consistent with seller peer effects."
[13] "Does Trust Promote Entrepreneurship in a Developing Country?" (with Kitae Sohn), Singapore Economic Review, forthcoming, (2016 online first http://dx.doi.org/10.1142/S0217590816500144) [download] (JIF=0.221)
(Abstract)
"Trust was found to promote entrepreneurship in the US. We investigated whether this was true in a developing country, Indonesia. We failed to replicate this; this failure was true whether trust was estimated at the individual or community level or whether ordinary least squares (OLS) or two stage least squares (2SLS) was employed. We reconciled the difference between our results and those for the US by arguing that the weak enforcement of property rights in developing countries and the consequent hold-up problem make it more efficient for entrepreneurs to produce generic goods than relationship-specific goods—producing generic goods does not depend on trust."
[14] "What Does CEOs' Pay-for-Performance Reveal About Shareholders' Attitude Toward Earnings Overstatements?" (with Katherine Guthrie and Jan Sokolowsky), Journal of Business Ethics, forthcoming, (2015 online first doi:10.1007/s10551-015-2891-y). [download] (JIF=1.837)
(Abstract)
"If overstatements were a symptom of the agency conflict, pay-for-performance sensitivities should have increased in response to the additional penalties for misreporting imposed by SOX. Our finding of their decrease is inconsistent with the view that overstatements were an unintended consequence of incentive pay prior to 2002. To corroborate our interpretation, we show that (i) CEO pay-for-performance sensitivities are higher among firms whose shareholders stand to benefit from overstatements; (ii) this cross-sectional relationship weakens significantly after SOX; and (iii) the within-firm decrease in pay-for-performance sensitivity is most pronounced among firms with high pre-SOX shareholder benefits from overstatements."
[15] "The Effect of Public Service Motivation and Job Level on Bureaucrats' Preference for Direct Policy Instruments" (with Miyeon Song, Seyoung Cha, Naon Min), Journal of Public Administration Research and Theory, 2017, 27(1), 36-51. [download] (JIF=3.893)
(Abstract)
"Despite growing reliance on indirect market-based policy instruments under the New Public Management reforms, bureaucrats often prefer direct regulatory instruments. Thus, for successful implementation of indirect policy instruments, it is important to understand the underlying motives for bureaucrats’ preferences. This article shows that based on unique survey data from Korea, bureaucrats with higher public service motivation have a stronger preference for direct policy instruments. This pattern is strong for bureaucrats at lower job levels and for those who report greater willingness for self-sacrifice, but not necessarily for those who show strong commitment for the public interest. These results contradict a view that bureaucrats prefer direct policy instruments out of self-interest to maintain private benefits. Rather, direct policy instruments may require more work and even more unpleasant direct interactions with the clientele being served, but allow the bureaucrats to stay in control of and feel more responsible for the services provided."
[16] "Public-Private Mixed Delivery and Information Effects" (with Sangin Park), Economica, forthcoming (2016 online first doi:10.1111/ecca.12203). [download] (JIF=1.045)
(Abstract)
"This paper analyses public–private mixed delivery of essential public services under price regulation. A private firm may have lower production costs and can potentially provide a performance benchmark for a public firm. A public firm may offer higher-quality service and can reveal the production cost of the private firm to the regulator. However, this paper shows that public–private mixed delivery does not always dominate public delivery or private delivery. Mixed delivery is optimal only when (i) the cost uncertainty of the private firm is large, (ii) the managerial incentive problem of the public firm is large, and (iii) the performances of the public and private firms are highly correlated."
[17] "Job Dissatisfaction of the Self-Employed in Indonesia" (with Kitae Sohn), Small Business Economics, forthcoming (2017 online first doi:10.1007/s11187-016-9820-z) [download] (JIF=1.795]
(Abstract)
"In developed countries, the self-employed have been found to be more satisfied with their jobs than paid employees. We found the exact opposite for a developing country after analyzing 8732 respondents in the Indonesian Family Life Survey. The job dissatisfaction of the self-employed was not fully explained by earnings, personal traits, job characteristics, anticipation, or adaptation, but mostly by segregation into a small number of industries with few job benefits. This finding is consistent with the dual labor market theory. We also found that among the self-employed, those with the highest probability of being paid employees were the least satisfied. Paid employment was highly sought after in developing countries, and these were presumably self-employed workers with high abilities. This finding cannot be explained by the dual labor market theory alone. To explain this inconsistency, we enriched this theory with relative deprivation. Our results suggest that the existence of the dual labor market and relative deprivation are important determinants of the job satisfaction of the self-employed in developing countries."
Publications in Korean Journals
[1] "Fiscal Decentralization and Economic Growth: A Test for Granger Causality," Korean Journal of Policy Studies, 2011, 26(3), 161-177 [download]
[2] "Noisy and Subjective Performance Measure in Promotion Tournaments," Seoul Journal of Economics, 2012, 25(2), 207-221 [download]
[3] "Patent Thicket, Secrecy, and Licensing," The Korean Economic Review, 2012, 28(1), 27-49
[4] "공공/민간부문 성과급 비중과 주인-대리인 이론," 행정논총, 2012, 50(2), 113-142 [download]
[5] "지방상수도 통합운영에 따른 규모의 경제 원인 분석" - 산업조직연구, 2012, 20(4), 1-24. 조수연 공저.
[6] "정부신뢰에 대한 연구 - 대통령에 대한 신뢰와 정부정책에 대한 평가비교를 중심으로" - 한국정책학회보, 2013, 22(2), 181-206. 전대성, 정광호 공저. [download]
[7] "여성 공무원의 승진 동기에 미치는 영향요인 연구: 평등성과 공정성을 중심으로" - 한국거버넌스학회보, 2015, 22(2), 309-336. 한승희 공저 [download]
[8] "Tenure and Worker Mobility: Role of Specific Human Capital", 응용경제, 2015, 17(4), 5-25.
[9] "Employment-Friendly Welfare Policy and Information Asymmetry: Evidence from Sweden and Korea" (with Jinho Lee), Korean Journal of Policy Studies, 2016, 31(1), 133-152.
[10] "Patent Thickets: Licensing and Optimal Patent Protection," 응용경제, 2016, 18(3), 55-80.
[11] "국무총리 임명 유형 연구: 정치적 환경과 대통령 선호의 균형역학," 한국행정학보, 2016, 50(3), 101-130. 박찬영 공저. [download]
[12] "공직 임용의 폐쇄성과 부패," 한국거버넌스학회보, 2016, 23(3), 333-352.
Working Papers
- "Corporate Governance and Efficiency of Government R&D Grants" with Chanyoung Park
(abstract)
"Using the unique grant level data from the Korean National Science & Technology Information Service (NTIS), this paper shows that R&D grants to private firms lead to more innovation when independent monitoring (e.g. outside director share) in the grant receiving firms is stronger, but to less innovation when chaebol influence (e.g. affiliated ownership) is stronger. However, the direct effect of independent monitoring on reported innovation is negative, while that of chaebol influence is positive. These results are consistent with the hypotheses that independent monitoring reduces the misuse of grant money; increases the efficiency of managing R&D grants; and reduces the overstatement of grant outcomes, while chaebol influence does the opposite."
- "Gender Quota in the Civil Service and Female Participation: Evidence from Nepal" with Hari Prasad Upadhaya
(abstract)
"This paper provides a theoretical framework on barriers to female leadership and the impacts of gender quota policies, and presents empirical evidence based on the gender quota in the civil service of Nepal. Despite the male dominant cultural background, the gender quota has significantly increased the number of female applications, especially in the services with higher male shares and in higher ranks, but decreased the number of male applications. These findings suggest that barriers to female leadership were not due to a lack of female aspiration but to discrimination against women."
- "Researcher Mobility and Business Cycle" with Lena Hensvik
(abstract)
"The Schumpeterian theory of business cycle suggests that firms would invest relatively more in R&D during recessions than during booms because the returns of investment in sales, or the opportunity cost of R&D investment, are lower during recessions. However, most empirical evidence shows that R&D investment is pro-cyclical, called the “pro-cyclical R&D puzzle”. Recent studies blame the credit constraints for the puzzle, and show that R&D investment is counter-cyclical for non-credit constrained firms. In this paper, we highlight the importance of R&D human capital investment - measured by hiring of researchers and reassignment workers to R&D occupations, and show that R&D human capital investment is counter-cyclical. That is, during recessions, firms hire relatively more researchers from outside the firms, and reassign relatively more workers to R&D departments within the firms. These results provide more direct evidence in support of the Schumpeterian hypothesis, and suggest that the pro-cyclical R&D puzzle is partly due to the fact that most previous studies have focused on R&D physical capital investment. Taken together, our results also suggest that R&D human capital investment and R&D physical capital investment are substitutes, rather than complements, for the credit-constrained firms."
- "Trust and Entrepreneurship: Theory and Evidence" with Kitae Sohn
- "Working for Female Managers: Gender Hierarchy in the Workplace" with Eva Meyersson Milgrom
- "Status in the Workplace: Evidence from M&A" with Eva Meyersson Milgrom