What If You Had Been Less Fortunate: The Effects of Poor Family Background on Current Labor Market Outcomes

Sungwook Cho () and Almas Heshmati
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Sungwook Cho: Sogang University

No 7708, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This study examines the correlation between childhood poverty and its influence on adulthood wage distribution, where childhood poverty refers to experience of poverty or poor family background during one's childhood. With the data from Korean Labor Income Panel Study, KLIPS, quantile regression technique and decomposition method are conducted to identify and decompose the wage gap between low (poor) and middle class income group along the whole current wage distribution, based on a simulated counterfactual distribution. The results show that, those who had been less fortunate during their childhood likely had less opportunity to gain labor market favored characteristics such as a higher level of education, and even earn lower returns to their labor market characteristics in the current labor market. This leads to a discount of about fifteen percentages points off of the wage on average in total for those with underprivileged backgrounds during childhood compared to those with the middle class background, and that disadvantage is observed heterogeneously, greater at the lower quantiles than the higher quantiles of the current wage distribution. Then this research contributes to the literature by providing a partial understanding of poverty in Korea and its possible causes, in particular, in form of poor family background or childhood poverty, with which the implication of intergenerational effect issue is considered.

Keywords: family background; childhood poverty; wage inequality; wage distribution; decomposition; quantile regression; labor market outcome; Korea (search for similar items in EconPapers)
JEL-codes: C21 E24 J13 J31 J62 O15 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2013-10
New Economics Papers: this item is included in nep-lab and nep-lma
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Published - published in: Journal of Economic Studies, 2015, 42 (1), 20-33.

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