Comments by Phanith Chou, on Reassessing Inflation in South Korea: An Alternative Approach Using the Engel Curve

South Korea's inflation rate based on the consumer price index has remained stable at around 2 percent and was moderate even during the COVID-19 pandemic. Although average income adjusted for inflation has increased, public sentiment reflects concerns about the high cost of living and a decrease in disposable income. Using an Engel-curve based methodology, we find that from 2010 to 2021, the average annual increase in consumer prices ranged from 4.6 percent to 6.6 percent, two to three times higher than the official record. This study explores several contributing factors that explain this discrepancy and examines its implications for policy decision-making.

Comments by Mary-Françoise Renard, on Reassessing Inflation in South Korea: An Alternative Approach Using the Engel Curve

Time-varying capital intensities and the hump-shaped evolution of economic activity in manufacturing

Time-Varying Capital Intensities and the Hump-Shaped Evolution of Economic Activity in Manufacturing

This study examines how household adjustments to rising residential energy prices amplify welfare losses. Using household-level expenditure data from the Korean Household Income and Expenditure Survey from 2019 to 2022, we construct a pseudo-panel and estimate the Exact Affine Stone Index (EASI) model. Our analyses identify several key findings. First, the results represent that household energy demand is complementary with food and health expenditures but substitutable with transport and other goods. This implies that households tend to adjust their spending patterns in response to energy price fluctuations. Second, the results reveal that the Engel curve for energy exhibits a declining trend across expenditure percentiles. This indicates that lower-expenditure households allocate a larger share of their budget to energy, suggesting greater vulnerability to rising energy prices. Third, welfare simulations reveal that allowing for households’ budget adjustments yields compensating variation estimates that are approximately 1.3 times larger than those obtained under a no-adjustment scenario when energy prices double. These findings highlight that ignoring behavioural adjustments may lead to an underestimation of the welfare impacts of rising residential energy prices, particularly for low‑income households.

China is undergoing a marked transition in its diet and nutritional status patterns. This study determines the structural change in the impact of income on food consumption in China during 1989-93. Utilizing data from a longitudinal study of 3800 households in China evidence points to a shift in the relationship between income dietary structure and total nutrient intake at the macrolevel. Overall it is noted that the increase in income over time in the country coincided with a shift in the demand for inferior and normal food groups. In addition there was a pronounced increase in the income elasticity for more luxury foods during the specified period while less superior goods became more inferior over this 4-year span. Such an increase in income elasticities for total energy and for energy from fat suggest a worsening of the composition of the diet in ways that are linked to obesity and obesity-related diseases as incomes continue to rise. In view of this several implications for the formulation of future nutrition policies in China are cited.