The Effects of East Asian Welfare States on Inequality and Poverty: Comparative Study of Korea, Taiwan, and Japan in 1986-2016

Eunyoung Ha (하은영)

This book explores how effectively East Asian welfare states such as Korea, Japan, and Taiwan have reduced income inequality and poverty in the period from 1986 to 2016. East Asian countries enjoyed the reputation of “growth with equity”(World Bank 1993), maintaining low levels of income inequality and poverty. However, since the mid-1990s, they have experienced growing income inequality and poverty. In order to alleviate growing inequality, Japan has significantly increased their social expenditures (roughly from 11 % of GDP in the 1980s to 23 % in the 2010s). Korea and Taiwan have also significantly increased social spending (roughly from 3 % in the 1980s of GDP to 11% in the 2010s for both countries). Nonetheless, these countries have failed to reduce inequality and poverty effectively. The primary research question of the book is why the increased social spending has not had the expected redistributive effects in these countries. These results seem to support “the paradox of redistribution” (Korpi and Palme 1998), suggesting that social expenditures targeted to the poor are actually less likely to have redistributive impact.

In this book I argue that east Asian welfare states have not been effective in reducing inequality and poverty because their social welfare systems are designed to target the middle- to high-income groups rather than low-income groups. East Asian welfare states, often called “developmental welfare states” (Kwon 2002, 2009) and “small welfare states (Yang, 2017), have developed their social insurances based on earning-related benefits and prioritized formal, full-time workers in the provision of social benefits. Therefore, the increased social expenditures have left informally employed or unemployed low-income groups out of the social benefits. Although tax systems in these countries are progressive (e.g., cumulative nominal income tax rates), their redistributive effects have been limited because of the regressive tax expenditures (tax allowances and exemptions favoring the rich and large corporations) as a “hidden form of the welfare state’ (Howard 1999).

Using cross-country times-series data analysis, this book systematically analyzes 1) how different categories of welfare and tax policies have changed inequality and poverty in Korea, Taiwan, and Japan for the last 30 years, and 2) how the redistributive effects are different across the Asian welfare states as well as western European welfare states. This book will contribute to the current debates on the effectiveness of welfare state models, but also provide important policy implications for the development of welfare states in Korea and the other Asian countries.

ToC:  1. Introduction: Inequality and Poverty in East Asian Welfare States; 2. Review of Literature and Theoretical Arguments; 3. The Effect of Social Welfare Policies on Inequality and Poverty Reduction in Korea, 1986-2016; 4. The Effect of Tax Policies on Inequality and Poverty Reduction in Korea, 1989-2016; 5. The Effect of Social Policies on Inequality and Poverty Reduction in Taiwan, 1986-2016; 6. The Effect of Social Policies on Inequality and Poverty Reduction in Japan, 1986-2016; 7. Differences of East Asian Welfare States: Comparative Analysis of Korea, Japan, and Taiwan; 8. Comparative Analysis of East Asian Welfare States and West European Welfare States; 9. Conclusion and Policy Implications