Social Spending in Korea: Can it Foster Sustainable and Inclusive Growth?
IMF Working Papers, October 19, 2012
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- Social Spending in Korea: Can it Foster Sustainable and Inclusive Growth?
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Bibliographic details
- Authors: Selim A Elekdag
- Published: October 19, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475549218.001
Major challenges
- Korea faces two closely related challenges: sustaining economic growth against the backdrop of a rapidly aging population and ameliorating income inequality.
- 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.
Main argument and simulation findings
- The paper argues that a gradual increase in social spending could promote more sustainable and inclusive growth in Korea.
- Simulation results suggest that social spending which supports labor market reforms can boost longer-term growth.
- Despite rapid increases recently—albeit from a low base—there is still a social spending gap relative to Korea’s OECD peers.
Policy implications and recommendations
- Increase social spending gradually (incremental increases).
- Guide increases by a longer-term fiscal framework.
- Target social spending to support labor market reforms to enhance longer-term growth.
Content in this bundle
- 2. Social Spending Gap