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The Evolution of Income Risk and Consumption Insurance in South Korea over the Last Two Decades

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  • Taehyun Ahn
  • Chung Gu Chee
  • Seonghoon Kim

Abstract

Using data from the Korea Labor Income Panel Study, we study the evolution of income risk and consumption insurance against transitory and permanent income shocks in South Korea over the last two decades. We find a decreasing trend in both income and consumption risks. Furthermore, we estimate that 47.6% of permanent income shocks and 9.8% of transitory income shocks pass through to consumption. We also provide evidence of substantial improvements in consumption insurance among the less educated and the older cohort nearing retirement. Our results suggest that recent developments of social safety net and welfare system may have played an important role in insuring income shocks in South Korea.

Suggested Citation

  • Taehyun Ahn & Chung Gu Chee & Seonghoon Kim, 2021. "The Evolution of Income Risk and Consumption Insurance in South Korea over the Last Two Decades," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(2), pages 328-351, April.
    • Handle: RePEc:bla:obuest:v:83:y:2021:i:2:p:328-351
    DOI: 10.1111/obes.12404
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    References listed on IDEAS

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    1. Greg Kaplan & Giovanni L. Violante, 2010. "How Much Consumption Insurance beyond Self-Insurance?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(4), pages 53-87, October.
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    6. Richard Blundell & Ian Preston, 1998. "Consumption Inequality and Income Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(2), pages 603-640.
    7. Joon Yong Jo, 2008. "Korea: Economic Development, Social Security and Productive Welfare," Palgrave Macmillan Books, in: James Midgley & Kwong-leung Tang (ed.), Social Security, the Economy and Development, chapter 7, pages 187-209, Palgrave Macmillan.
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    1. Anastasia Petaykina, 2023. "Estimation of Sensitivity of Russian Household Consumption to Permanent and Transitory Income Shocks Using Kalman Filter," Russian Journal of Money and Finance, Bank of Russia, vol. 82(3), pages 110-127, September.

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