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Has Generational Inequality Increased? Decomposition of the Between- and Within-Generational Inequality, 1999~2019

ChangHwan Kim 1 Andrew Taeho Kim 2

1Univ. of Kansas
2University of Kansas

Excellent Accredited

ABSTRACT

Prior studies on the generational inequality analyzed household income using the Household Income and Expenditure Survey (HIES) and argued that the between-generational earnings gap has increased. Generational inequality, however, should be measured based on the individual labor market earnings. The results of previous studies may suffer from the omitted variable bias as they failed to control for relevant covariates. Prior studies did not distinguish the net effect of generation on earnings from the effect associated with the change in age composition. In this study, we estimate individual labor market earnings using the 1999~2019 HIES and assess whether the net effect of generation has increased in accounting for earnings inequality. Our empirical results show that contrary to the popular perception and prior studies, between-generation inequality has not grown. The detailed decomposition results which control for education and other covariates indicate that the growth of between-generational inequality is fully attributable to the increase in the size of the older population. The net effect of generation did not change. No evidence supports that the dominance of the 86 Generation at the upper labor market causes the growth in earnings inequality either. The relative increase in earnings among the 86 Generation is evident only at the lower part of the earnings distribution. These results cast serious doubt on the validity of the claim that generation is a key structural dimension of earnings inequality in South Korea.

Citation status

* References for papers published after 2023 are currently being built.

This paper was written with support from the National Research Foundation of Korea.