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  5. The K-Economy: Achievements, Challenges, and Opportunities
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The K-Economy: Achievements, Challenges, and Opportunities

Paper Session

Friday, Jan. 3, 2025 2:30 PM - 4:30 PM (PST)

Hilton San Francisco Union Square, Union Square 22
Hosted By: Korea-America Economic Association
  • Chair: John Riew, Pennsylvania State University

Compressed Development, Decompression, and Diverging Convergence in Korea: Changing Nature of the Economic Systems over the Last 60 Years

Keun Lee
,
Seoul National University

Abstract

South Korea has achieved compressed growth and convergence of its income level to that of typical advanced economies. This paper adopts a narrow definition of compressed development as a form of late development that lacks political democracy and open markets, and then defines decompression as the process of democratization and economic liberalization. This paper applies this framework of "compressed development, decompression, and diverging convergence" to analyze the dynamics of Korean capitalism since the 1980s after the death of the modernizer-dictator, President Park. First, the middle class emerged in Korea in the 1980s as a result of compressed growth since the 1960s and served as a key intermediary in linking economic growth to democratization. The process of political decompression, or democratization, was peaceful because it was demanded and led not by the working class but by the middle class. Second, an ill-managed first wave of economic decompression (liberalization) led to a financial crisis, and then the post-crisis reforms (the second, more radical decompression) imposed by the IMF planted the institutional seeds for convergence with Anglo-American capitalism. Third, Korea is experiencing the end of the East Asian miracle, as evidenced by slowing growth and rising inequality, and is undergoing a multifaceted convergence toward different varieties of capitalism. In terms of life expectancy and crime rates, Korea joins Japan, Italy and Spain in the "safe capitalism" group, while it is an extreme outlier in terms of its large gender wage gap and long working hours. In terms of unemployment and long-term employment rates, Korea is closer to the Anglo-American model, but closer to Europe in terms of the degree of active (or passive) labor market policies and legal protection against layoffs. Korea seems to be realizing "divergent convergence" as it remains distinct from any particular form of Western capitalism.

Low Birth Rates in Korea and Policy Implications

Minchul Yum
,
Virginia Commonwealth University

Abstract

South Korea has one of the lowest birth rates in the world, with significant social and economic implications. We examine the factors contributing to this decline, including economic pressures and evolving cultural norms. Additionally, we explore the effectiveness of current government policies aimed at reversing the trend, such as financial incentives and parental leave reforms, while discussing the theoretical foundations of pro-natal policies.

Family-Friendly Firms and Worker Outcomes

Jungmin Lee
,
Seoul National University
Ross Chu
,
University of California-Berkeley
Tammy Lee
,
University of Michigan-Ann Arbor

Abstract

How do family-friendly firms influence workers' decisions and labor market outcomes? With the rise of dual-income households, many countries have introduced policies to support work-family balance. While some of these initiatives are public, others are offered directly through employers. However, there is limited evidence on how employer-provided family-friendly policies impact workers. This project examines the effects of such policies using administrative data from Korea and a unique policy reform that mandated family-friendly benefit provisions in the workplace. Through a dynamic difference-in-differences approach, we find that workers with young children actively seek employment at family-friendly firms. Additionally, our results suggest that firms share the costs of providing these benefits with their employees. Together, these findings contribute new empirical insights into the effects of workplace family-friendly policies on labor market outcomes.

An Evaluation of Social Security Reforms: Implications for the Aging Korea

Soojin Kim
,
Georgia State University
Serena Rhee
,
Chung-Ang University

Abstract

We study the effects of a Social Security reform in the United States in conjunction with Disability Insurance (DI). The Social Security reform in 1983 increased retirement age and increased early claiming penalty of Social Security benefits, making DI program relatively more attractive to individuals near retirement. We empirically document that cohorts impacted by the reform are more likely to receive DI and start DI at younger age, with more pronounced effects among less-educated workers. In a model with endogenous DI and Social Security claiming decisions, we quantify the fiscal and redistributive effects of the reform.
JEL Classifications
  • D1 - Household Behavior and Family Economics
  • I2 - Education and Research Institutions