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Limited Income Mobility: Empirical Evidence from Korea

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Abstract

Using the Korea Labor and Income Panel Study from 1998 to 2010, we measure income mobility and determinants of income ranks and mobility. Empirical outcomes reveal that income mobility is quite limited for both the poorest and the richest income households. Moreover, a macro economic shock had heterogeneous impacts on each income group and the low-income class was highly vulnerable to it. Given the long-lasting impacts of early stage factors and initial endowment on income, this paper calls for policies to support citizens suffering from illness, family breakdown, poor initial conditions, and aging.

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Fig. 1

Source OECD; Luxembourg income study database; Socio-economic database for Latin America and the Caribbean; World Bank; Eurostat (from the Wall Street Journal, March 13, 2014)

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Notes

  1. Social mobility refers to “movements by specific entities between periods in terms of socioeconomic status indicators” (Behrman 2000). While sociologists have been interested in mobility between social classes or occupational groups, economists have focused primarily on mobility in terms of income.

  2. Refer to Jäntti and Jenkins (2013) for the comprehensive review of income mobility from mobility concepts, measures to empirical evidences.

  3. Income mobility can be classified into intragenerational and intergenerational income mobility. The former follows the movement of an individual’s income from one year to the next while the latter follows individuals’ earnings throughout their lives.

  4. For available databases and details of these empirical studies, refer to Atkinson et al. (1992) and Burkhauser and Couch (2009).

  5. Households with income lower than 50%, 50–75%, 75–150%, and higher than 150%, compared to the medium income, were stratified into the lowest, lower-middle, upper-middle and highest groups.

  6. Market income consists of wages, salaries, property incomes, and private income transfers, while ordinary income adds public income transfers to market income.

  7. Early stage factors or conditions, which include age, gender, and education, are mostly determined before people enter the labor market, and post stage factors or conditions, which include working experience or abilities learned while working, ex-post or after entering the labor market.

  8. The design of the KLIPS is comparable to the US’s Panel Study of Income Dynamics (PSID) and the UK’s British Household Panel Study (BHPS).

  9. In the 9th wave during 2006, the retention rate in the KLIPS was approximately 76.5, while those of the PSID (in 1976) and BHPS (in 1999) in the 9th wave were 71.2 and 72.1%, respectively.

  10. Refer to Jäntti and Jenkins (2013) that have a comprehensive review on measures of income mobility.

  11. They were estimated using the MPROBIT command in STATA.

  12. This is the one of the first papers to estimate intragenerational income elasticity using a regression approach. Therefore, we could not find previous estimates for intragenerational income elasticity for the case of Korea.

  13. The estimation results in both the short run and the long run were similar except for the case of the dummy variable, Seoul. Therefore, we focused on the long run estimation results.

  14. This also meant that income elasticity would be larger for the \(k\) th income group than others.

  15. Statistics Korea provides a monthly dummy variable that, based on the business cycle, takes a value of 1 for contraction periods and 0 for expansion periods. Therefore, we constructed a variable, Recession, by taking the average and converting it to yearly data, in order to match it with the annual data of the KLIPS.

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Acknowledgements

I appreciate the support by the Korea Development Institute, the Korea Exim Bank and the Asian Development Bank.

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Authors and Affiliations

  1. College of International Studies, Kyung Hee University, Seocheon-dong 1, Giheung-gu, Yongin-si, Gyeonggi-do, 446-701, Korea

    Hyungna Oh

  2. School of Economics, Yonsei University, 50 Yonsei-Ro, Seodaemun-gu, Seoul, 120-749, Korea

    Yun Jeong Choi

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Correspondence to Yun Jeong Choi.

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Oh, H., Choi, Y.J. Limited Income Mobility: Empirical Evidence from Korea. Soc Indic Res 138, 665–687 (2018). https://doi.org/10.1007/s11205-017-1670-9

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