Trends of Income Inequality in Korea

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Abstract

This paper reviews the trends of income inequality in Korea from 2000 to 2011. The income inequality in Korea has increased consistently until 2009, and somewhat decreased in 2010. There are reasons to believe that this decrease is more likely to be temporary rather than structural. The decrease in income inequality in 2010 is due to expanded social welfare benefits, such as transfer income to the poor. In order to improve overall economic status and reduce income inequality, policy efforts should be exerted to create more stable employment opportunities with better compensation. Also called for is more active policy intervention to increase the transfer payment. The nature of tax policy is also important. Despite the government’s claim that the recent tax cuts are not for the rich, to the extent that the tax cuts are implemented in favor of the rich, the income inequality will continue to persist.