Growth, inequality and structural changes in Korea: Egalitarian growth and its demise

Abstract

This article examines structural changes in the Korean economy and their implications for inequality and growth. Korea is well known for rapid economic growth and equal income distribution in the past. It has been called the East Asian miracle, the result of historical initial conditions and government policy efforts. However, after the 1997 financial crisis and economic restructuring, Korea’s egalitarian growth model is over. In the neoliberal growth model of the postcrisis period, the Korean economy has suffered from a vicious cycle of rising income inequality and stagnant economic growth. This article also discusses how structural changes such as industrialization and deindustrialization of the economy are associated with the historical changes in inequality in Korea. It argues that we can observe Kuznets waves in Korea with the upswing of inequality in the recent period. The author calls for efforts of the Korean government to expand social welfare, strengthen workers, and implement democratic structural reform for inclusive growth.