Does an economic crisis deflate education bubble and inequality? Lessons from South Korea 1997–2020

Rapid education expansion has been a main driver of the remarkable economic growth in South Korea for last decades. However, in recent times, its excessive education credentialism is considered a hurdle against further developments. This study examined whether education bubble and inequality decreased during the Asian Financial Crisis 1997–98, the Global Financial Crisis 2008–09, and the COVID‐19 pandemic 2020. It tracked quarterly distributional changes in private education expenditure of Korean households with Changes‐in‐Changes. The findings indicate that Korean households postponed private education expenditure cut in the first quarter of the crises to prevent their children from falling behind in severe education competition. Then, they temporarily downsized it in the second quarter. During the pandemic, vulnerable students experienced higher fluctuations in private education expenditure than they did in previous crises closely related to disproportionate effects of the pandemic on household income and consumption expenditure. Therefore, this study suggests more expansionary measures for disadvantaged students to recover from a learning loss and improving the public education system as a fundamental measure to mitigate severe private education dependency.