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Social Spending in Korea : Can it Foster Sustainable and Inclusive Growth?

Author/Editor: Selim Elekdag
Authorized for Distribution: October 19, 2012
Electronic Access: Free Full Text (PDF file size is 1,224KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: Going forward, Korea faces two closely related challenges: sustaining economic growth against the backdrop of a rapidly aging population and ameliorating income inequality. This paper argues that a gradual increase in social spending could promote more sustainable and inclusive growth in Korea. In particular, simulation results suggest that social spending which supports labor market reforms can boost longer-term growth. However, despite rapid increases recently—albeit from a low base—there is still a social spending gap relative to Korea’s OECD peers. Because of several fiscal challenges in the coming decades, increases in social spending should be incremental, and would be usefully guided by a longer-term fiscal framework.
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Series: Working Paper No. 12/250
Subject(s): Government expenditures | Korea, Republic of | Social safety nets | Labor market reforms | Economic growth
    Published:   October 19, 2012        
    ISBN/ISSN:   9781475549218/1018-5941   Format:   Paper
    Stock No:   WPIEA2012250   Pages:   21
    Price:   US$18.00
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