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Policy Study
Korea’s Preference for Redistribution and the Policy Decisions

June 29, 2020

Policy Study
Korea’s Preference for Redistribution and the Policy Decisions

June 29, 2020

    Executive Summary


    Theoretical Discussions about the Preference for Redistribution

    Characteristics of Korea’s Preference for Redistribution: A Social Norm Perspective

    Changes in Korea’s Preference for Redistribution and Analysis of the Causes

    Summary and Conclusion

While Korea’s compressed development has enriched and bolstered the economy, the social system still leaves much to be desired. The reason for this shortcoming lies within a short history of capitalism and growth-oriented policies that sacrifice distribution.
The end of Korea’s accelerated growth and ensuing sharp drop in social mobility—which drove the dynamics of Korean society—have incited growing concern over income inequality and inherited wealth. As a result, more and more people have begun to recognize the need for redistribution policies to resolve the socioeconomic inequality. The problem is, however, how much redistribution policy will meet the people’s expectations?
As evidenced by the controversies over the policies for free school meals and half-price tuition from 2010, and by the response to the various redistribution policies of the Moon Jae-in administration, Koreans are highly divided in their opinions about the level of redistribution. Nonetheless, little effort has been made to understand the degree to which views differ, and to discover the factors that lead to such conflict. Rather, debates over policy are overly focused on theoretical justification, which has served to escalate social tension, and there have been no substantial moves towards building social consensus on distributive justice.
The policies of a democracy are not justified by abstract goals and political rhetoric, but through the people’s support. Thus, a good grasp is first needed of the wide array of public opinion. This study aims to highlight this issue.
The starting point of this study is the recognition that individuals have rational reasons for their preference for redistribution. Accordingly, Chapter 2 investigates the basic theories on the determinants of the preference for redistribution to ascertain these reasons. It introduces different theoretical bases and related studies on economic factors, such as income level, possibility of upward mobility (POUM), past experiences, and externalities of inequality, along with sociocultural factors, such as political inclination, perception of fairness, social competition, and trust in government. The aim is to create a foundation on which individuals’ preference for redistribution can be understood.
Meanwhile, a review of the discourse on Korea’s preference for redistribution reveals that of the many empirical analyses that have been conducted, none have presented concrete fact, but rather, have left room for more controversy. Most notably, the majority of studies contend that Korea’s preference for redistribution is unlike those seen in theories and Western countries; which could be owed to the different belief systems and social norms that have formed during Korea’s rapid growth. Additionally, it appears as though people have yet to choose a concrete stance in terms of the welfare system and government, and build their expectations. As such, in terms of gaining a better grasp of Korea’s preference for redistribution, it is more important to understand what has transpired thus far and to forecast future changes than to look at current cross-sectional characteristics.
Chapter 3 delves into the reasons for Korea’s unique preference for redistribution. Ironically, although Koreans are readily accepting of market functions—as shown by their relatively positive perception of income generation and wealth expansion, and the fact that income disparity is viewed as compensation for effort rather than an inequality—they also have a strong preference for government redistribution policies, which distort the outcome of market distribution. This is in direct conflict with general normative relationships.
Two types of distributive justice are discussed to find the source of this contradictory normative relationship: micro- and macro-level distributive justice. The former is found in the economic sphere and is a rule that is connected to the specific choices of individuals and organizations, and is based on the principle of differentiating by effort or capability. The latter is found in the political sphere and is a rule that functions under a fully universal and abstract unit (e.g. social structure or system), and is based on the principle of equality which aims to strengthen universality and protect the vulnerable population.
The focus of the empirical analysis has been placed on how people select a distributive justice. Specifically, the treatment of both forms of distributive justice are compared based on progressive political inclination. The results reveal that the progressive inclination in East Asia (including Korea), and Transition countries bolsters the demand for redistribution in the government sector, while also establishing positive opinions about market functions in the market sector. This is possible because their market norms incorporate progressive social values that root out outdated practices; which implies that, although they remain incomplete, micro- and macro-level distributive justice can both be pursued at the same time. As a result, Koreans exhibit a unique preference for redistribution that is based on dual expectations and differs from those seen in Europe, where governments redress the failures of the market, and in the US, where the market has absolute superiority.
However, as it can be seen through the Korean case, a divided perception structure does not always indicate a stable balance. This is because, as individuals acquire more experience of the market and government, the links begin to appear and they realize that the market requires a level of state intervention (sacrifice of or damage to micro-level distributive justice) to secure the resources that are needed for redistribution (realization of macro-level distributive justice). Thus, it is possible that Korea’s strong preference is a transitional characteristic that manifests itself during the development of capitalism.
Meanwhile Chapter 4 provides an overview of the recent developments in the preference for redistribution among Koreans and the reasons for the changes using the World Value Survey (WVS) wave 7 which was conducted in 2017.
The results reveal that, firstly, Korea’s preference for redistribution has changed drastically since 2010 with the preference for redistribution sharply waning and polarizing due to the conflict between political inclinations, increasing generational gaps, and changing social perceptions owing to tensions between political factions. In terms of political inclination, although the spectrum widened after the impeachment of President Park in 2016-2017, it does not provide an explanation for why the preference for redistribution has become polarized. Furthermore, given that this polarization appears for all generations, the generational gap also appears not to be a direct cause. Meanwhile, there is an increasing trend in the negative perceptions of market functions and fairness, resulting in a bimodal structure that is similar to the one seen in the preference for redistribution.
To look more closely at the factors that impact the preference for redistribution, an analysis is conducted using a time-interaction term model which finds that economic factors and social perception have the biggest influence as an increasing number of individuals base their opinions on economic conditions, such as income level and type of employment, and as social perceptions of the market and fairness change. In particular, we can see that the preference for redistribution is moving closer towards contemporary theoretical explanations as the interaction term of the variable YI (positive view of market functions; competition is beneficial) shifts to negative range. This result also supports the discussion in Chapter 3 that the dual pursuit of micro- and macro-level distributive justice in Korea is a transitional phenomenon.
Finally, Chapter 5 reviews the policy implications. The key point is that, instead of recognizing it as a matter of right and wrong, the government should approach redistribution policies with an open mind, and be ready to listen to different opinions in order to broaden the foundations to build social consensus. Unlike Western countries, Korea lacks a universal principle which means that, when final decisions are made by society through a majority vote without social consensus, it may deepen the divide and weaken the base required to achieve social consensus.
In particular, the government should turn way from party politics and trying to justify its redistribution policies, and make efforts to persuade the people in a prudent manner. Efforts are also needed to encourage stakeholders and experts to participate in the policymaking process to ensure that more accurate predictions are available about the impact of such policies while controversial issues are avoided to prevent unnecessary social tension. Lastly, ample information must be provided and opinions coordinated so that the people are able to understand the broader context.
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Office of Global Economy
Providing Economic Forecast and Macroeconomic Policy Direction, the Groundwork for a Brighter Future

The Department of Macroeconomics is conducting researches on the macro economy and macroeconomic policy, particularly focusing on suggesting the analysis of macroeconomic trends and current status of the economy at home and abroad, the economic forecast, and the policy direction of the macro economy. The Department is also in charge of establishing, sustaining and maintaining various econometric models, based on which it analyses policy effects and develops a long-term economic forecast.

Main Tasks
  • Economic trend analysis, short- and long-term forecast
  • Policy study on macroeconomic management
  • Basic structural analysis on macroeconomic areas
  • Maintenance of multi-sectoral dynamic macroeconomic model
Department of Macroeconomic Policy
  • LEE. Tae Suk

    Director, Division of Analysis and Evaluation

  • CHO, Byungkoo On leave

    Director and Vice President, Department of North Korean Economy

  • LEE, Jongkyu


  • WEE, Hyeseung Dispatched

    Research Associate

  • NAM, Jinwook On leave


  • KIM, Seulki

    Research Associate

  • CHUN, Eunkyung

    Research Associate

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