contents go

KDI - Korea Development Institute

KDI - Korea Development Institute

SITEMAP

Popular Search Terms

HOT ISSUE

News KDI-Brookings Joint Research Book Launch Event

KDI and the Brookings Institution held an event in Washington, DC to commemorate the release of their third joint research report.

October 22, 2024
KDI News What‘s Up Newsletter Vol.14

The 14th issue of the KDI What's Up newsletter is now available!

October 23, 2024
Other Research KOR KDI Review of the North Korean Economy, September 2024

The September issue features eight articles on recent trends and future challenges in North Korean economic research.

September 30, 2024
Economic Bulletin Economic Bulletin, October 2024

In July, services production and facilities investment increased, while industrial production, retail sales, and construction investment decreased.

September 30, 2024
News 2024 KSP Dissemination Conference

Celebrating the 20th anniversary of Knowledge Sharing Program (KSP), "2024 KSP Dissemination Conference: 20th Anniversary of Knowledge Sharing Program(KSP)" was held on Friday, September 6, 2024.

September 12, 2024
News 2024 Global Economy & Financial Stability Conference

Korea Development Institute (KDI) and The Ministry of Economy and Finance hosted the "2024 Global Economy & Financial Stability Conference" on September 3rd and 4th at the Plaza Hotel in Seoul.

September 11, 2024
KDI FOCUS Impact of Policy Incentives on Adoption of Electric Vehicles in South Korea

South Korea’s strategies for deploying battery electric vehicles (BEVs) primarily include providing purchase subsidies and expanding charging infrastructure.

July 03, 2024
BACK
HOME
BACK
123
Join our Newsletter

World's Leading Think Tank, Korea Development Institute

Security code

We reject unauthorized collection of email addresses posted on our website by using email address collecting programs or other technical devices. To access the email address, please type in the characters exactly as they appear in the box below.

captcha
KDI Staff Information

Please enter the security code to prevent unauthorized information collection.

KDI Staff Information

Please check the contact information.

OK
KDI Staff Information

Please check the contact information.

OK

Summary

KDI FOCUS Women’s Career Interruptions and the Declining Fertility Rate in South Korea
In South Korea, more women are postponing or forgoing childbirth due to concerns about career interruption. Their conscious decision to refrain from motherhood is estimated to be responsible for about 40% of the decrease in the fertility rate. In the face of the world’s lowest fertility rate, Korea needs to overhaul its policies to better support work-life balance, enabling parents to maintain their careers while raising children.

- Traditional economic theory explains the decline in fertility rates as a result of the increase in women’s opportunity costs.

- Since the 2000s, a positive correlation between women’s labor force participation rates, income, and fertility rates has been commonly observed in high-income countries, which appears to be closely associated with the extent to which women (mothers) can balance work and family life.

- South Korea’s low fertility rate may have stemmed from the disproportionate burden of childcare on women, combined with the persistent difficulty in balancing work and family life, leading women to postpone or forgo childbirth.

- If the presence of children significantly affects women’s probability of career interruption, the number of women who forgo childbirth while maintaining their careers due to these concerns may increase.

- If young women choose to have children, their probability of career interruption increases by about 14%p, leading to a higher likelihood of experiencing a substantial level of economic loss throughout their lifetime.

- Since the mid-2010s, Korea’s total fertility rate has rapidly decreased, as the gap in career interruptions based on parenthood status has widened.

- Recently (2013~19), the gender employment gap has narrowed. Still, this converging trend has been limited to the young without children, ironically increasing the women’s opportunity costs for choosing to give birth. This increased child penalty is estimated to account for about 40% of the overall decline in the fertility rate.

- Policies aimed at preventing career interruptions for women with children are expected to contribute to raising the fertility rate by reducing the number of women who delay or forgo childbirth.

- Policies that mitigate career interruptions for women with children can increase labor supply and prevent the erosion of irrecoverable human capital, thereby not only helping to raise the fertility rate but also promoting macroeconomic growth.

Summary

Policy Study KOR Income Mobility in Korea and Policy Implications
This study examines the limitations of income mobility indicators, which are mainly used in existing studies, and presents the results of applying the analysis method of Krebs et al.(2019) to Korean survey data. The temporary income shock on residual income, which is not explained by individual characteristics such as education, job career, age, and so on, increases income mobility, but has a small impact on social welfare. On the other hand, the faster the permanent income shock disappears, the faster the difference between the residual income of low- and high-income earners decreases, and the higher the income mobility and social welfare. Of course, the greater the variance of the initial permanent income variance, and the greater the magnitude of the permanent income impact afterwards, the higher the income mobility but the lower the social welfare. In addition, 80 percent of one-year short-term income mobility was analyzed due to temporary shocks, including measurement errors, so it seems desirable to analyze income mobility analysis at least over the span of three years.

Korea’s income mobility itself is analyzed to have increased further since around 2012, but social welfare has decreased. This implies that the analysis of income mobility indicators themselves should not be the sole purpose of analysis. In order to increase social welfare as well as increase income mobility, it seems necessary to reduce the persistence of permanent shocks and reduce the size of external economic shocks that result in changes in residual income.

Even if income mobility is slightly reduced after tax, personal income tax acting as a buffer that can alleviate the size of income shocks increases social welfare. In this regard, it seems necessary to impose more burden on high-income earners of health insurance premiums and national pension premiums. the government cash transfer, which is being provided for the purpose of protecting the vulnerable, rather significantly reduced income mobility and social welfare, which seems due to the sharp increase in the portion of government cash transfer given to the top 40 percent earners comparing to 2007-2008. It is necessary, through further review, to be more careful in setting the beneficiaries of policy measures so that government cash transfer can be concentrated on the vulnerable.

The new income mobility analysis method introduced in this study can be applied to the study for income tax reform through a more detailed analysis for each component of income tax. However, this will be possible only when the National Tax Service has wider access to detailed items on individual income tax return form. In addition, the portion of government cash transfer given to high-income earners is also deemed for further review using administrative data.

Summary

KDI FOCUS Intergenerational Equity and Sustainability in Korea: Toward Participatory Policy Governance
□ Cases of policy decision-making processes that fail to fully recognize the foreseeable problems facing younger and future generations indicate that current policy governance is vulnerable in terms of intergenerational equity and sustainability. Hence, it is vital to design an effective policy governance system for resolving intergenerational problems; one in which policymakers can consider the long-term impact of their decisions not only on different living generations but also on future generations. To fulfill this task, a participatory policy governance system has been proposed as a way of promoting the input from different generations, and on behalf of future generations in policy decision-making processes in the legislative and administrative sectors. Creating a civic culture for future responsibility at the community level should be also emphasized. Institutionalizing the participatory policy governance system and the culture for future responsibility could help to alleviate increasing generational conflict in Korea during the coming era of slow growth and aging population.

- Generational conflicts are increasingly likely to grow stronger in the policy decision-making process as well as in voting.

- Indeed, some policy cases even failed to take into account of the fully expected problems and are simply centered on present generations.

- Most respondents in all age groups agree on the need for an institutional mechanism that could strengthen younger people’s political influence.

- Positive responses to the willingness for intergenerational communication and discussion outnumber the negative responses, while 20s remain laid-back.

- Efforts to seek intergenerational equity and sustainability encounter challenges such as deepening generational heterogeneity resulting from rapid changes in Korean history, rapid aging of the population, weak social trust, and poor capacity to resolve conflicts.

- Efforts are needed to appoint representatives of younger and future generations to the National Assembly through the proportional representation system, to establish a permanent committee for future generations, and to lower the voting age.

- Other efforts include establishing a presidential committee for future generations, creating a system of participatory budgeting that includes young people and adolescents, gathering public opinion through direct democratic methods, and enhancing access to policy information.

- Improving civic awareness and capabilities through civic movements could serve as a basis for pursuing broader participation, deliberation, and consensus building in governance.

Summary

Research Monograph KOR Intergenerational Equity and Sustainability in Korea
Pressured by mounting social conflict, Korean society is struggling on weak capabilities to secure social trust and coordinate public issues. The nation already bears the heavy weight of old feuds: chronic ideological conflict born from the long history of war and division; regional conflict caused by unbalanced regional development and division, which are rooted in party politics; and ethnic conflict arising from the growing influx of foreigners. However, combined with aggravating intergenerational conflict, social cohesion is poised to become an even bigger challenge for Korea.

This study is the result of multidisciplinary efforts to analyze and seek out feasible solutions to newly looming conflicts between generations. Intergenerational conflict is not simply the consequence of rapid changes within Korean society and resultant widening gap of experiences and awareness between generations. Conflict of interest between generations can be triggered by structural change with respect to the direction of distribution and investment brought on by a rapidly aging population and slow-growth phase of the economy, among others. This is well reflected in some young adults’ negative attitude towards the elderly welfare policy, extension of the retirement age and housing price stimulus plan.

In recognition of current conditions, this study first analyzes the generational disparities in terms of social awareness regarding social values, political behavior patterns and citizenship; which often sew the seeds of conflict as well as provide ways to reveal them. Then, it looks into intergenerational equity issues with respect to tax revenue and expenditure, encompassing the intergenerational tax burden and public transfer expenditure. Furthermore, it analyzes intergenerational problems in key social policy areas, including employment, housing and pension, and presents a win-win solution. Finally, the study concludes with suggestions to improve policy governance which will, in turn, enhance intergenerational equity and sustainability.

Summary

Research Monograph Measuring and Explaining Subjective Well-being in Korea
Subjective well-being has attracted sharply increasing attention among researchers and policy makers in recent years. The public also pays a lot of attention to it, evidenced by the heavy use of the word “happiness” in media. Some researchers argue that subjective well-being measures should serve as important and reliable measures of human well-being, complementary to the more traditional, more material wellbeing measures such as Gross National Income (GNI). The World Happiness Report 2012 and 2013 strongly support the idea. The Organization for Economic Co-operation and Development (OECD) published Guidelines on Measuring Subjective Well-being in 2013 to help governments planning to measure subjective well-being, and to provide standards for how it is done. The Korean government seems to move in this direction: One of the main agenda of the government of Korea is to increase the happiness of each citizen. However, there is no comprehensive study on Korea’s subjective well-being to guide policy makers. For example, Korea is often labeled as an unhappy society, as reported by media and perceived by the public, based on some scattered evidence. Is it true? Existing studies do not provide a clear answer. This study is the first comprehensive investigation into subjective well-being in Korea. We aim to show a clearer and more complete picture of Korea’s subjective well-being, including its past and current status, its distribution over time, cohorts, and regions, and its determinants, based on the vast majority of available data. We then offer a few tentative policy suggestions. There are six chapters in this report. The main points are summarized as follows.

Summary

KDI FOCUS Relative Concern: Pros and Cons and Lessons to be Learned
□ Individuals with a strong tendency to compare themselves to others are those who place the priority on work, position, and material goods; have a high degree of financial success; and tend to engage in overconsumption and conspicuous consumption. However, this relative concern was correlated with poorer health and low degrees of happiness and life satisfaction. In order for upward comparison to be a catalyst for self-development, fair competition must be ensured. Relative concern can be used to nudge people into socially desirable behaviors, but in order to increase the degree of happiness, it is necessary to counter the negative effects of social comparison and look after the quality of life to enable people to enjoy a balanced life.

- Relative concern is a double-edged sword. It can have the positive effect of stimulating self-development, but it can also have a negative effect on happiness.

- Around 36% of Koreans consider it important to compare their standard of living with people around them, while 25% think it is not important.

- People who are inclined to relative concern tend to prioritize work and material values and have a goal-oriented mindset.

- Individuals with a tendency for relative concern were also likely to exhibit herding and maximizing behavior, while their altruism tended to be limited to their children and their spouse.

- For each one-point increase on the relative concern scale, monthly income went up by 29%, real estate value by 22%, and financial assets by 21%.

- For each one-point increase on the relative concern scale, expenditures on high-priced durable goods such as automobiles went up by 42 %.

- Individuals inclined to relative concern had high levels of anxiety, stress, depression, insomnia, and feelings of isolation, and they had low levels of happiness and satisfaction about their life as a whole.

- For each one-point increase on the relative concern scale, happiness fell by a level commensurate with a 20 million won drop in household income.

- Relative concern, which Respondents with a tendency for relative concern were more likely to attribute unhappiness to restrictions on upward mobility, the economic recession, decreasing material satisfaction, anxiety about security issues, and in particular an increase in relative deprivation.

- Relative concern, which implies concern about other’s opinions, can be used to lead people to make conspicuous donations and to reduce use of electricity through peer pressure.

- As competition intensifies in a zero-sum game where success is narrowly defined, the positive effects of relative concern are reduced.

- If upward comparison is to become a catalyst for development, the person being compared to must not be too far ahead; there must be a way to catch up with that person, and it must be possible to compete with them.

- At present, most Koreans prioritize work and financial success. If they are to enjoy greater happiness, they need to achieve a balanced life in which consideration is also given to well-being in the domains of personal relationships, health, and the community.

- Research into behavioral economics, which can reveal the characteristics of human psychology and behavior, has the potential to promote policy goals through non-coercive and inexpensive means.

Summary

Policy Study Status Race and Happiness: What Experimental Surveys Tell Us
People’s concern about their relative status is regarded as an explanation to the Easterlin paradox, which reports that happiness has not increased despite continued growth in average income. The strength of concerns about relative position varies across people.

First, we examine the socio-demographic characteristics and values that lead to a strong relative concern. And then we comprehensively investigate differences in financial outcomes, health, happiness, and behaviors by the degree of relative concern. In particular, Korea is an appropriate country for this study as Koreans have experienced rapid economic growth and there exists severe status race in their education system and labor market. Using data from our experimental survey of 3,000 Koreans, we examine their preference for positional goods and behaviors regarding herding, status seeking, and altruism.

Our results show that those who have stronger relative concerns are more likely to live in upscale districts and place economic values above non-pecuniary values, and, in reality, they have better financial outcomes. They also exhibit higher tendencies of overconsumption and conspicuous consumption. Their health, however, is worse than others, specifically in regards to psychological health. Moreover, overall happiness and satisfaction in every dimension are proved to be lower for those who have stronger relative concerns. In a series of hypothetical situations of our survey, they consistently show higher inclinations toward status race and herding but lower degrees of altruism or sympathy.

As for policy implications, we discuss the following issues. First, we show Koreans’ diagnoses of the reasons for their unhappiness and examine how relative concern affects such diagnoses. Second, we discuss government intervention to remedy positional externalities based on our survey results about people’s perceived positionality of selected goods that have a negative influence on others’ welfare. Third, we show that Koreans’ relative concerns do not necessarily arise from their materialistic values and they are undergoing transformation of individual values toward post-materialism, which makes a room for remedial change of institutions that have led excessive social comparisons and competitions. Fourth, we discuss policy directions for reducing negative effects of social comparison in the context of contemporary Korea focusing on the education system and labor market reform. Last but not least, we suggest some examples of nudge ideas using people’s relative concern for the whole society and the motivation of self-improvement via social comparison, which implies that relative concern can be made good use of as well.