How Much Do We Know About Income Inequality in Korea?

Abstract

Many policy makers accept empirical results as ‘facts’ without questioning the limitations of the summary statistics. The most infamous example of such would be the use of Gini as a ‘proof’ of worsening levels of income inequality after the Foreign Currency Crisis in 1998. The fundamental question that should be asked before anything is whether the change in inequality is statistically significant, and rightly so in such a way that would command immediate government intervention.The income inequality trend shows that the changes in the Gini coefficient are statistically significant at a 90% level between 1991 and 2001. On the other hand, the trend of Gini based on total expenditure of all households, which could be interpreted as representing the wellbeing of households, shows no significant changes throughout the periods. Gini Coefficient and the standard errors are estimated using the simple OLS estimation method as suggested by Giles (2002) based on Urban Household Income and Expenditure Survey.