Income Inequality in South Korea, 1933-2022

While South Korea was one of the poorest countries in the world in the 1960s, it sustained positive growth in the 1980s and 1990s until the Asian financial crisis in 1997. But has this so called “Miracle on the Han River” really lifted Korea out of poverty without increasing inequality?

Using household survey micro data, tax data, and national accounts, Sehyun Hong, Nak Nyeon Kim, Zhexun Mo, and Li Yang construct annual pre-tax income inequality series for South Korea since 1933. They show the distribution of pre-tax national income over the period from 1933 to 2022.

KEY FINDINGS

• The share of pre-tax national income held by top earners declined between the 1930s and 1970s and then increased. After the Asian financial crisis in 1997, income inequality worsened and is now approaching colonial-era levels. The rise in top income concentration in recent years is mostly associated with an increase in tax-exempt capital income inequality.
• Compared with other East Asian countries, South Korea has relatively lower levels of income inequality, largely because its national income growth was more equally distributed in the early stages of economic take-off in the 1980s. Yet, income inequality has worsened over the last three decades.
• South Korea’s top 1% income share, however, is much higher than in other East Asian countries, except Taiwan. This is driven by high tax-exempt capital income concentration at the top of the distribution—specifically, private shares in corporate retained earnings in South Korea, which are absent in Japan and China.

AUTHORS

• Sehyun Hong, Paris School of Economics; World Inequality Lab
• Nak Nyeon Kim, Dongguk University, WID Fellow
• Zhexun Mo, Paris School of Economics; World Inequality Lab
• Li Yang, ZEW-Leibniz Centre for European Economic Research; World Inequality Lab

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