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Social Spending in Korea: Can it Foster Sustainable and Inclusive Growth?

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  • Mr. Selim A Elekdag

Abstract

Going forward, Korea faces two closely related challenges: sustaining economic growth against the backdrop of a rapidly aging population and ameliorating income inequality. This paper argues that a gradual increase in social spending could promote more sustainable and inclusive growth in Korea. In particular, simulation results suggest that social spending which supports labor market reforms can boost longer-term growth. However, despite rapid increases recently—albeit from a low base—there is still a social spending gap relative to Korea’s OECD peers. Because of several fiscal challenges in the coming decades, increases in social spending should be incremental, and would be usefully guided by a longer-term fiscal framework.

Suggested Citation

  • Mr. Selim A Elekdag, 2012. "Social Spending in Korea: Can it Foster Sustainable and Inclusive Growth?," IMF Working Papers 2012/250, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2012/250
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    References listed on IDEAS

    as
    1. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 465-490.
    2. Isabell Koske & Jean-Marc Fournier & Isabelle Wanner, 2012. "Less Income Inequality and More Growth – Are They Compatible? Part 2. The Distribution of Labour Income," OECD Economics Department Working Papers 925, OECD Publishing.
    3. Mr. Subir Lall & Mr. Selim A Elekdag & Mr. Harun Alp, 2012. "Did Korean Monetary Policy Help Soften the Impact of the Global Financial Crisis of 2008-2009?," IMF Working Papers 2012/005, International Monetary Fund.
    4. Mr. Selim A Elekdag & Mr. Saade Chami & Mr. Ivan Tchakarov, 2004. "What Are the Potential Economic Benefits of Enlarging the Gulf Cooperation Council?," IMF Working Papers 2004/152, International Monetary Fund.
    5. Selim Elekdag & Alejandro Justiniano & Ivan Tchakarov, 2006. "An Estimated Small Open Economy Model of the Financial Accelerator," IMF Staff Papers, Palgrave Macmillan, vol. 53(2), pages 1-2.
    6. Il SaKong, 1993. "Korea in the World Economy," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 29, January.
    7. Mr. Alejandro Justiniano Espigares & Mr. Selim A Elekdag & Mr. Ivan Tchakarov, 2005. "An Estimated Small Open Economy Model of the Financial Accelerator," IMF Working Papers 2005/044, International Monetary Fund.
    8. Mr. Murtaza H Syed & Mr. Michael Skaarup & Mr. Tarhan Feyzioglu, 2008. "Addressing Korea’s Long-Term Fiscal Challenges," IMF Working Papers 2008/027, International Monetary Fund.
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    Cited by:

    1. Kross, Karmo, 2013. "Developmental welfare capitalism in East Asia with a special emphasis on South Korea," Discourses in Social Market Economy 2013-05, OrdnungsPolitisches Portal (OPO).

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