Identifying the Potential Influences on Income Inequality Changes in Korea - Income Factor Source Analysis

Abstract

This study attempts to measure what effects the direction and size of contributions of a number of different income sources at the household level has on the changes in inequality indexes in Korea between 1988 and 2002. Based on the Urban Household Income and Expenditure Survey (UHIES) from the National Statistics Office (NSO), it is found that the household head wage income has a decreasing effect on inequality, whereas the wage income from spouses and other members of households seem to increase the level of inequality at the household level, where the magnitude of such an effect on market income inequality is far smaller than that of the household head wage income. However, due to the inherent limitations of UHIES, generalizing the empirical findings to all types of households becomes questionable. The analytical tool used in this study is based on Shorrocks' natural decomposition method (1982, 1983) and Lerman and Yitzhaki's (1985) Gini decomposition method.

Keywords: Inequality, Decomposition, Income source

JEL Classification: D33, E25, H55, I32, J30, N35