KEA RESEARCH

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The Korean Economic Association was launched in Pusan on November, 30, 1952.

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KOREAN JOURNAL OF ECONOMIC STUDIES

Gender and Age Patterns in the Recent Increase of Single-person Households

Dae Il Kim (Seoul National University)

Year 2018 / Vol 66 / No 2

This paper shows that the recent increase of single-person households in thelast decade has resulted from delayed marriage among the young populationand stronger tendency for old people to live separately from their children.Factors such as working status and pension incomes have differing impacts onthe decision to form a single-person household between men and women.Delayed marriage is more pronounced among working women, and publicpensions have contributed in the increase of single-person households amongold women. One potential policy implication is that the factors distorting thechoice between work and family needs be removed to prevent inefficientlydelayed marriages among the young population.

MTWTFFF Participation in Private Tutoring: Are Students in South Korea Happy Enough?

Young-Chul Kim (Sogang University)

Year 2018 / Vol 66 / No 2

The competitive college entrance system and excessive use of privatesupplementary tutoring (shadow education) in South Korea may harm students’quality of life and mental health. However, according to the analysis using theKorea Youth Panel Survey(KYPS) dataset, we do not find that the time spenton the private tutoring is negatively associated with the present lifesatisfaction. Only for the middle school students, we confirm the plausibilitythat reducing the time spent on private tutoring during the weekdays may leadto the enhanced life satisfaction. On the other hand, we also find a statisticallysignificant positive relationship between the time spent on leisure activities onSunday and the students’ life satisfaction.

Economic Rationality and Economic Performance of Debt Relief Program Users

Jung Min Park (Seoul National University), Jinwook Shin (Seoul National University), Syngjoo Choi (Seoul National University) and Sok Chul Hong (Seoul National University)

Year 2018 / Vol 66 / No 2

This paper reports an economics experiment measuring debt relief programusers’ decision making quality by the consistency of choices with utilitymaximization and compares their consistency scores with those of participantsin other studies using experiments of the same form. Consistency scores ofdebt relief program users are lower than those reported in other studies andare strongly related to variables describing their real-life economicperformance. The higher level of consistency with utility maximization anindividual scores in the experiment, the more likely the person is to be ableto work, the higher personal income he or she earns, and the less likely theperson is to go bankruptcy. Our results suggest that the limitation of economicrationality affects individual economic activities and performance and is adeterminant of using debt relief programs.

KOREAN ECONOMIC REVIEW

Price Discrimination with Loss Averse and Horizontally Differentiated Consumers

Jong-Hee Hahn (Yonsei University), Jinwoo Kim (Seoul National University), Sang-Hyun Kim (Yonsei University) and Jihong Lee (Seoul National University)

Year 2018 / Vol 34 / No 2

This paper considers a monopolist seller facing horizontally differentiated consumers,whose preferences are reference-dependent and loss averse in the frame of Kőszegi and Rabin(2006). Our results on optimal menu suggest that consumer loss aversion does not necessarily limit the benefits of screening under the horizontal demand structure, in contrast to the findings of Hahn, Kim, Kim and Lee (2018) and Herweg and Mierendorff (2013) who consider the case of vertically differentiated preferences. 

Peer Pressure with Inequity Aversion

Kangsik Choi (Pusan National University), Jae-Joon Han (Inha University) and Minhwan Lee (Inha University)

Year 2018 / Vol 34 / No 2

To examine the effects of peer pressure on outputs under symmetric and asymmetric information, we define a peer pressure function representing psychological costs and incorporate it into the agent’s utility function. Under symmetric information, an efficient agent who is averse to inequity (i.e., suffering from being ahead) produces less than he does without peer pressure whereas an inefficient agent suffering from being behind produces more such that the output gap between the two types of agents is lessened. Moreover,overproduction in total output will occur if the inefficient agent’s disadvantage inequity aversion is greater than that of the efficient agent’s. However, as the information structure becomes asymmetric, the overproduction disappears because the information rent paid to the efficient agent becomes too burdensome so that it countervails the active peer pressure effect.These results are consistent with previous findings from empirical and experimental studies. 

Retrospective Generational Accounts for Korea

Young Jun Chun (Hanyang University) and Ji Eun Song (National Assembly Futures Institute)

Year 2018 / Vol 34 / No 2

This study addresses fiscal sustainability and generational equity of Korea by using generational accounting (GA). Unlike previous Korean GA studies, we compute retrospective GA, assessing the value of net taxes paid in the past combining this with traditional forward-looking GA, appraising the rest-of-life net tax burden to obtain full lifetime accounts (FLGA). FLGA cover the entire life for all the cohorts. We find that the fiscal policies of Korea bring about generational inequity. The net tax burden of future generations should be raised to an unbearable level, higher than 40% of lifetime income, to service government spending under the current policies. In addition, we show that parametric reforms to resolve the problem have only limited effects even under the demographic assumptions that subsidy to childbirth and childcare and open-door immigration policy substantially reverse population aging and reduction, which indicates the requirement of many fundamental reforms.  

KOREAN ECONOMIC FORUM

How to Reform the Korean Economy

Jaymin Lee (Yonsei University)

Year 2018 / Vol 11 / No 2

Korea has to establish market economy while revising it at the same time.The two tasks have many complementary dimensions. The government shouldfirst check the interests of the more powerful forces of the society and theninduce weaker parries to join the reform efforts. Korea needs to pursueexpansionary fiscal policy to repair the infrastructure, create more governmentjobs, and increase welfare expenditure. In the longer run, the country shouldcontain rent-seeking activities, restructure the national innovation system andreform the dualism in industrial organization. The current Korean government’sefforts to create government jobs must be combined with the reform of thepublic sector. Minimum wage should be raised in combination with EITC. Thereduction of working hours and non-regular workers should be carried out byconcluding social pact. Labor supply should be more differentiated than thecurrent simple stratification based on schooling. To reduce income inequality,the bargaining power of subcontractors should be raised and fair trade regulationshould be strengthened. The coverage ratio of the national health insuranceshould be raised and the dead angle of the employment insurance and nationalpension service should be narrowed. The increase of taxation should beaccompanied by the reform of the public sector.

Korean Inclusive Growth: Its Measurement and Relationship with Policy Variables

Won-Kyu Kim (KIET) and Sung Wook Hong (KIET)

Year 2018 / Vol 11 / No 2

This paper defines the inclusive growth as the sum of labor productivity,employment ratio and income equality growth rates and measures Koreaninclusive growth(IG) using annual data since 1990. Korean IG showed decliningtrend as a whole since 1990 and in particular labor productivity slowdowncontributed to IG decline during 2011-2016. According to the estimation results,the following variables are found to have positive relations with IG in particular:investment ratio and total factor productivity in labor productivity part; incomeredistribution policy effect in income equality part; laborforce participation ratioand female & youth employment ratios in employment ratio part; and ICTinvestment ratio in the other variables.

New Growth Engine and Inclusive Growth in the 4th Industrial Revolution

Hee-Su Kim KT Economics and Management Research Institute)

Year 2018 / Vol 11 / No 2

With the advent of the 4th Industrial Revolution, innovative ICTs have beendeveloping steadfastly at enormous pace, and tremendous changes have takenplace throughout the economy and our daily lives as industrial structure centersaround platform businesses. The key leading technologies in the new era includebut not limited to 5G, artificial intelligence, and blockchain. These technologiesnot only comprise their own individual industry, but also can be utilized as acore infrastructure of the 4th Industrial Revolution and create future growthengines by converging with existing industries. On the other hand, there alsohave been some concerns that socioeconomic problems caused by previouseconomic models focusing on growth, such as widening of income inequalitygap, job losses, low fertility and aging, could be aggravated. ‘Inclusive growth,’which endeavors to solve such social problems and achieve economic growth ina lump, is considered as a new panacea. Especially with the rapid developmentof innovative ICTs, the role of ICTs is becoming much more crucial in dealingwith such social problems. However, it would be difficult to propel inclusivegrowth if solely done on a private level, and to that end, governments shouldtake the leading role in creating new markets by bearing potential risks of aproject in its initial stage and by designing it as a mission-oriented project fortackling social problems.