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[Vol.24 No.1] Dispersion of Household Debt and Its Macroeconomic Implications: Evidence from South Korea

Group : Macro Economy
Economic Research Institute (02-759-5318) 2018.03.31 4278

Authors : Ki Young Park(Yonsei University),·Soohyon Kim(The Bank of Korea)


This study establishes the stylized facts on economic inequality using KLIPS (Korean Labor & Income Panel Study) of 2001-2015 and presents empirical evidence on their macroeconomic implications. Firstly, we find that inequalities of after-tax disposable income and consumption have not increased in 2000s, contradicting public belief. However, dispersion of household debt by income group has steadily widened in 2000s as high-income group leads a run-up of household debt while low-income group faces more limited access to financial markets. Secondly, in addition to the widening debt dispersion, usages of debt are very different depending on income levels. Using fixed effects panel regressions and panel VARs, we find that high-income group tends to borrow in order to invest in real estate assets or buy houses even with reducing non-housing consumption. Meanwhile, low-income group seems to borrow for consumption, not for investment. Based on our finding, we discuss the role of widening debt dispersion in terms of macroeconomic instability and persistent economic inequality.

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