University or job training: Korea and Germany compared

This study is the first to empirically compare the economic returns of human capital in South Korea and Germany. The study, based on the Mincer earnings model (1974), tested whether the wage gap between university graduates and those with lower educational levels is wider in South Korea than in Germany, due to differences in job training. The study estimated the wage gaps by employing random effects and quantile regressions, along with ordinary least squares. The data, which was taken from the “Korean Labor and Income Panel Study” and the “German Socio-Economic Panel,” covered the period 2004-2007 for males. The effects of university degrees on wages were about 40 percent higher than those of upper secondary school qualifications in both countries. However, this gap seemed to be wider in South Korea when observing individual heterogeneity. The effects of job training completed two years prior were 17–31 percent in Germany and 2.7–10 percent in Korea. In the case of job training completed one to six years earlier, German training also demonstrated stronger effects on wages in the longer term. The results revealed that training compensated for any educational wage differentials more strongly in Germany than in South Korea. Keywords: Job training; university; education; wage differential; Korea; Germany.