Inequality of Debt and its Macroeconomic Implications: A Case of South Korea

27 Pages Posted: 2 Feb 2016

Date Written: February 2, 2016

Abstract

This study establishes the stylized facts on inequality of debt during the period of 2001-2013 in South Korea, along with those of inequality of income and consumption, and present empirical evidence on its macroeconomic implications. Firstly, we find that income and consumption inequality have not increased in 2000s, contradicting public belief. However, as debt inequality has increased steadily in 2000s, high-income group leads a run-up of household debt while low-income group faces more limited access to financial markets. Secondly, usages of debt are very different depending on income levels. We find that, in average, high-income group borrows to invest in real estate assets or buy houses, while low-income group borrows to consume. We discuss our finding's implication in terms of macroeconomic instability in the short run and the effect of debt inequality on income and consumption inequality in the long run.

Keywords: debt inequality, household debt, consumption

JEL Classification: D1, D31, E21

Suggested Citation

Park, Ki Young, Inequality of Debt and its Macroeconomic Implications: A Case of South Korea (February 2, 2016). Available at SSRN: https://ssrn.com/abstract=2726473 or http://dx.doi.org/10.2139/ssrn.2726473

Ki Young Park (Contact Author)

Yonsei University ( email )

Yonsei University
Seoul
Korea, Republic of (South Korea)

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