State Intervention, Economic Growth, and Income Inequality in South Korea

Abstract

This paper develops a new window on income inequality in a rapidly developing country, which spans the tail end of the Kuznets curve and the more recent upswing in income inequality, as is case with the quadratic polynomial equation. Time series analyses reveal that the continued importance of certain structural conditions, such as energy consumption and education, is clear whereas voting participation is not a perfect means of reducing income inequality. The results give mixed support to the Keynesian model that state intervention has an influence on inequality and suggest a cautious interpretation when the trickle-down effect is controlled. The compatibility between economic growth and income inequality is rejected in a short-term strategy but is confirmed in a long-term strategy under circumstances of state intervention.