This paper examines the political and institutional factors associated with rising income inequality in South Korea. Drawing theoretical insights from recent discussions in the comparative political economy literature, I examine the trends of income i...
This paper examines the political and institutional factors associated with rising income inequality in South Korea. Drawing theoretical insights from recent discussions in the comparative political economy literature, I examine the trends of income inequality in South Korea from the early 1980s up until the early 2000s; whether the governments in this new democracy responded to the policy needs of the electorate; and whether the Korean welfare state was responsive to changes in income inequality. Furthermore, the paper puts the Korean experience into a comparative context with advanced industrialized countries.
An exploratory analysis of the Korean aggregate data reveals increasing pay inequality as well as rising household income inequality particularly since the financial crisis in 1997. Moreover, my analysis finds that changes in unemployment has no association whatsoever with changes in income inequality, taking into account the fact that the year 1998 was an outlier in the data series. Analysis of the association between changes in inequality and changes in welfare spending suggests that the Korean welfare state was not responsive to rising inequality. This low level of 'welfare elasticity' implies a 'democratic deficit' in South Korea in that the level of the governments' democratic responsiveness was quite low. Comparative analysis finds that the Korean experience can be evidently classified into the 'high inequality-low welfare spending' cluster along with the liberal market economies. The 'low inequality-high welfare spending' cluster (the social market economies) is associated with higher levels of unionization and voter turnout ─ the political mobilization of power resources.
The empirical findings of this paper implies that the Korean experience of low turnout and lower levels of union density combined with simple plurality electoral rules may account for lower levels of democratic responsiveness in the context of rising income inequality.