A microeconometric analysis on the impact of the 1997 economic crisis of Korea on labour market, household economy and social welfare.

An economic crisis broke out in Asian region in 1997. Korea severely suffered from the economic crisis. This thesis examined the impact of the 1997 economic crisis on the Korean economy. The analysis focused on the impact of economic crisis on labour market, household economy, and social welfare. The analysis on labour market impact focused on both female labour force participation and male unemployment duration. The analysis on household economy impact focused on both household income and consumer behaviour. The analysis on social welfare impact focused on both inequality and social welfare. The analysis is an empirical research using econometric methods based on two micro level datasets: the 1998 Korean Labor and Income Panel Study (KLIPS) and the Family Income and Expenditure Survey (FIES) of Korea from 1991 to 1999. The probit model, the cox proportional hazard model, the cohort analysis and its decomposition method, the nonparametric kernel regression method, the Quadratic Almost Ideal Demand System (QAIDS), the second order approximation of welfare measure, and the input- output methodology were employed to estimate the impact of economic crisis. Major findings are as follows. The predicted probability of female labour force participation decreased by 12.8 percent. The conditional probability of being employed decreased by 36.6 percent for male unemployed. Younger generation was more severely affected in the labour market. Household median income in 1998 decreased by 15.9 percent to that in 1994. Income of younger cohorts, households in Seoul, and wage earners group were more heavily affected. The Korean consumers increased food, fuel, and transport expenditure shares and decreased clothing and service shares in the face of economic hardship. Income inequality and poverty severely worsened. Inequality differences among age cohorts, regional, and occupational groups dramatically increased. The social welfare based on indirect utility level decreased by 11.3 percent at -1.5 inequality aversion parameter after the economic crisis