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The Evolution of Income Risk and Consumption Insurance in South Korea over the Last Two Decades *
Author(s) -
Ahn Taehyun,
Chee Chung Gu,
Kim Seonghoon
Publication year - 2021
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/obes.12404
Subject(s) - consumption (sociology) , permanent income hypothesis , economics , welfare , demographic economics , social insurance , consumption smoothing , autonomous consumption , panel data , safety net , labour economics , macroeconomics , unemployment , econometrics , life cycle hypothesis , market economy , debt , social science , sociology , political science , law
Using data from the Korea Labor Income Panel Study, we study the evolution of income risk and consumption insurance against transitory and permanent income shocks in South Korea over the last two decades. We find a decreasing trend in both income and consumption risks. Furthermore, we estimate that 47.6% of permanent income shocks and 9.8% of transitory income shocks pass through to consumption. We also provide evidence of substantial improvements in consumption insurance among the less educated and the older cohort nearing retirement. Our results suggest that recent developments of social safety net and welfare system may have played an important role in insuring income shocks in South Korea.