Abstract

This paper examines the level of income inequality in Korea compared to other countries and investigates how much redistribution policies have reduced inequality. To address this question, the Distributional National Accounts for Korea from 1982 to 2022 were estimated and compared with the results from the United States and France. The key findings include the following: first, the inequality of post-tax income in Korea has fluctuated significantly over time but has shown a decreasing trend since 2007. While the trends in inequality before and after the Asian financial crisis were primarily driven by factors related to pretax income, redistribution factors have increasingly played a more critical role over time. Second, the inequality of pretax income was highest in the United States, followed by Korea and France, and the same order was observed for post-tax income inequality. The differences in inequality levels among these countries are largely explained by factors present before redistribution. Third, the income redistribution effect in Korea was minimal in 1982, but a rapid catch-up occurred, bringing it close to the levels of the United States and France. Fourth, breaking down the effects of redistribution shows that the opposing effects of direct and indirect taxes largely canceled each other out, while SSCs, being proportional to income, had a minimal redistributive effect. In contrast, cash and in-kind transfers played a leading role in expanding redistribution. Fifth, these findings raise questions about the existing typology of welfare regimes.

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