The Korean Economic Review
Shrinking Middle Class and Changing Income Distribution of Korea: 1995-2005
Joon-Woo NahmYear 2008Vol. 24No. 2
This paper investigates the shrinking middle class hypothesis and reveals more details about recent trends in income distribution of Korea from 1995 to 2005. We find that the consensus view of a declining middle class is correct and the decline in the middle class splited equally into the lower class and the upper class in Korea. Furthermore, while the size and income share of the middle class declined, the share of the upper class increased rapidly and the share of the lower class remained stable over time. We then move beyond cross-sectional analyses to examine how the mobility of workers and families changed over this period. We present clues for who moved out of the middle class and the source of such changes using an ordered probit regression model.