Asset Effects On Economic Mobility in Korea

Background and Purpose: In Korea, policy makers have recently paid more attention to asset-building policies as a way to attack poverty and promote social development. Thus, it is critical to examine whether asset ownership prevents people from falling below the poverty line. Findings of the study will provide important evidence for expanding asset building programs to include more working poor and other disadvantaged populations. This study has three research questions are: What was the asset composition of the working poor from 1999 to 2008? What was the probability of the working poor exiting poverty? Did the working poor's assets affect their poverty dynamics and how?

Methods: The data used in this study came from the Korea Labor and Income Panel Study (KLIPS), from the first to the tenth wave. Of a total of 5,000 households, 2,058 were selected by: (1) merging household data with individual data; (2) compiling data of all years into one dataset; (3) choosing cases with two criteria of poverty status and employment status; and (4) transferring wide form data into long form for survival analysis. The dependent variable is a dichotomous variable with two categories: 0=poverty and 1=exit from poverty. Key independent variables are asset variables: financial assets, real assets, and total liabilities. Data analyses were conducted as follows: (1) descriptive statistics of socioeconomic demographics; (2) bivariate analyses to show asset composition and to compare asset variables with other covariates; (3) life-table method to calculate survival function of the duration of poverty; and (4) a discrete-time multivariate survival analysis to examine the association between the working poor's assets and the probability of exiting poverty.

Results: According to the life table's results, (1) the cumulative survival proportion for households with financial assets was higher than the proportion for households without financial assets. However, in long-term poverty duration, there was no difference in the proportion between both. It means that households in long-term poverty possessed low financial assets. (2) Households holding real assets showed a higher probability of exiting poverty than households without real assets. (3) The survival proportion of households with liabilities was higher than the proportion of households without liabilities. This shows that households in unstable economic condition try to overcome the situation by depending on liabilities. The Multivariate Analysis showed that households with financial assets have 1.91 times higher probability of rising out of poverty than households without financial assets. Also, owning real assets has a positive relationship with exiting from poverty, while possessing liabilities has a negative relationship with exiting poverty, although both were not statistically significant.

Implications: Based on these findings, this study suggests the following policy implications. First, an asset-building program is needed to address the problem of the working poor. In particular, this program needs to focus on providing the working poor with resources to help them keep working. Second, income assistances as well as asset-building programs are needed to support the working poor in long-term poverty.