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

Author/Editor:

Selim A Elekdag

Publication Date:

October 19, 2012

Electronic Access:

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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.

Series:

Working Paper No. 2012/250

Subject:

Aging Inclusive growth Income distribution Income inequality Labor Labor markets National accounts Personal income Population and demographics

English

Publication Date:

October 19, 2012

ISBN/ISSN:

9781475549218/1018-5941

Stock No:

WPIEA2012250

Pages:

21

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