The Impact of Financial Crises and IT Revolution on Income - - PowerPoint PPT Presentation

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The Impact of Financial Crises and IT Revolution on Income Distribution in Korea: Evidence from Social Accounting Matrices

WIOD Conference (2012) Groningen April 24-26, 2012

Hak K. Pyo , Keun Hee Rhee and Gong Lee

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Contents

1. INTRODUCTION 2. THE MULTIPLIER EFFECT AND RELATIVE INCOME DISTRIBUTION 3. MULTIPLIER EFFECTS AND INCOME REDISTRIBUTION EFFECTS IN KOREA (2000 and 2009) 3-1. Financial Crises and IT Revolution: An Overview 3-2. Macro-SAM in 2000 and 2009 with Micro-SAM 3-3. Multiplier Effects 3-4. Redistribution Effects

(1) The Redistribution Effects of Production Activity on Its Own Accounts (2) Redistribution Effects of Production Activity on Household Income (3) Redistribution Effects of Household Income on Production Sectors (4) Redistribution Effects of Household income on its Own Accounts

4. CONCLUSION

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• 1. Introduction
• Social Accounting Matrix (SAM) : analyze the

composition of national income and product and the process of income distribution. Pyatt and Round (1979), Thorbecke and Jung (1996), Roland-Holst and Sancho (1992),

Llop and Manresa (2004) and Saari, Dietzenbacher and Los (2010)

• It is important for policy making to modify the

distribution of income among economic agents.

• The purpose of this paper : analyze the impacts of IT

revolution and two financial crises on the determination of national income and changes in the level of income of endogenous sectors by constructing micro cell of household sector in Korea

following Noh and Nam (2006) and Pyo, Kim and Lee (2012)

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• 1. Introduction
• In recent years, Korea had experienced two

financial crises in 1997-1998 and 2007-2008 respectively and the IT revolution during the interval between the two financial crises.

• During the period of 1998-2007, the export

performance led by IT-intensive products has helped the economy to make a sustainable growth

• Analyze the impact of large scale depreciations

immediately after two financial crises and export drive of IT-intensive products during the two post-crisis periods by multiplier and redistribution analysis based on SAM

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• 2. The Multiplier Effect

and Relative Income Distribution

• Structure of SAM

where Aij are partitioned sub-matrices that contain the expenditure share coefficients calculated by dividing the transactions in the SAM by the corresponding sum column.

• multiplier matrix

M = (I – Amm)-1 is a multiplier matrix and x = AmzY

z is a vector of exogenous variables

Following Llop and Manreasa (2004) and Saari, Dietzenbacher and Los (2010)

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• 2. The Multiplier Effect

and Relative Income Distribution

• Redistribution Matrix

From Equation (2), a matrix related to relative income can be derived where R is defined as the m by m redistribution matrix. It shows the change in the relative income of the endogenous sectors caused by unitary modifications in the exogenous injections of income received.

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• Table1. Simplified Schematic Social Accounting Matrix

Expenditures Endogenous accounts Exogenos accounts Totals Factors Sectors (Households an d companies) Production a ctivities Sum of other acco unts 1 2 3 4 5 Receipts Endogenous sectors Factors 1 T13 x1 y-1 Sectors (households an d companies) 2 T21 T22 x2 y-2 Production activities 3 T32 T33 x3 y3 Exogenous sectors Sum of other accounts 4 l′1 l′2 l′3 t yx Totals 5 y′1 y′2 y′3 y′x

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• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) (1) Financial Crises and IT Revolution

decomposing production industries into 4 sectors as shown in Table 2:

(1) Higher IT-intensive Manufacturing (2) Lower IT-intensive Manufacturing with Agriculture and Mining (3) Higher IT-intensive Services and (4) Lower IT-intensive Services following Ha and Pyo (2004)

and Pyo and Ha (2007)

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• Table2. Industrial Classification by IT-Intensity

Main Category intensity Sub Category Main Category intensity Sub Category manufacturing sector low IT- intensity 1 agriculture and fishing service sector low IT- intensity 22 construction 2 mining 26 transportation, storage 3 food 29 real estate 4 textile, apparels, leather 32 gonerment 5 wood high IT- intensity 23 electicity, gas, water 6 paper allied 24 trade 10 rubber and plastic 25 hotels and restaurants 11 stone, clay, glass 27 communication 13 fabricated metal 28 finance, insurance 14 machinery 30 business services 16 electrical machinery 31 social and personal services 19 instrument 21 furniture and misc. manufacturing high IT- intensity 7 printing and publishing 8 coal and petroleum product 9 chemicals 12 primary metal 15 computer and peripherals 17 electric components 18 sound, video, communication equipment 20 transportation equipment

Source: Ha and Pyo (2004) and Pyo and Ha (2007)

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• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-1. Financial Crises and IT Revolution

Source: The Bank of Korea

Figure 1. GDP, Investment and Export Growth Rate: Korea 1995-2011

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Source: The Bank of Korea

Figure 2. Exchange Rate and Stock Price Index: Korea 1995-2011

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-1. Financial Crises and IT Revolution

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average growth rate 2000-2007 2008-2001 2000~2011 Gross Domestic Product 5.21 3.13 4.52 Agriculture, Forestry and Fishing 1.38 0.60 1.12 Mining, Quarrying and Manufacturing 8.10 5.73 7.31 Manufacturing 8.18 5.83 7.39 Services 4.53 2.63 3.89 Final Consumption Expenditure 4.71 2.38 3.93 Private 4.76 2.00 3.84 Government 4.53 3.73 4.26 Gross Fixed Capital Formation 4.46 0.45 3.13 Construction 2.95

• 2.03

1.29 Facilities Investment 7.13 4.65 6.30 Intangible Fixed Assets 7.95 3.40 6.43 Exports of Goods and Services 11.60 7.40 10.20 Imports of Goods and Services 10.69 5.05 8.81

Table 3. Average Growth Rate for different periods

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-1. Financial Crises and IT Revolution

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Table 3. Average Growth Rate for different periods (continued)

average growth rate 2000-2007 2008-2011 2000-2011 Gross Domestic Product 5.21 3.13 4.52 (1)manufacturing high IT-intensity industries 7.76 3.60 5.20 (2)Primary and manufacturing low IT-intensity industries 5.11 2.67 3.86 (3)service high IT-intensity industries 6.62 4.13 5.98 (4)service low IT-intensity industries 6.36 3.87 5.60 Exports of Goods and Services 11.60 7.40 10.20 (1)manufacturing high IT-intensity industries 11.94 7.58 10.45 (2)Primary and manufacturing low IT-intensity Industries 5.11 3.08 4.25 (3)service high IT-intensity industries 0.46 1.39 1.92 (4)service low IT-intensity industries 5.12 2.80 3.86

Source: The Bank of Korea

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-1. Financial Crises and IT Revolution

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• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-2. Macro-SAM in 2000 and 2009 with Micro-SAM

• Constructing Macro-SAM of Korea for year

2000 and 2009 by combining Input-Output Tables and National Accounts by the Bank of Korea in respective years.

• In order to construct a supplementary Micro-

SAM, we have used Korea Labor & Income Panel Study (KLIPS) Database (1998-2008) to decompose household sector into 10-Decile units.

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Income/ Expenditure Production Activities Production Commodities Labor Capital Household Corporate enterprise Government Combined enterprise Rest of World Error term Total

Production Activities 1,155,961 236,966 1,392,928 Production Commodities 793,283 352,371 61,653 188,443 1,395,750 Labor 267,134 696 267,830 Capital 194,087 6,954 201,041 Household 267,190 82,918 25,914 10,929 7,242 34,682 428,875 Corporate 108,609 7,788 59 116,456 Government 51,319 19,447 25,442 19,470 53 16,258 131,989 Combined enterprise 87,105 37,441 14,772 58,774 681 5,346 204,119 Rest of World 220,342 640 9,514 5,834 244 574 15,676 252,823 Error term 56,056 231 56,287 Total 1,392,928 1,395,750 267,830 201,041 428,875 116,456 131,989 204,119 252,823 56,287

Table 4. Macro Social Accounting Matrix (South Korea, Year 2000, 1 billion won)

Source: The Bank of Korea

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-2. Macro-SAM in 2000 and 2009 with Micro-SAM

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Table 5. Macro Social Accounting Matrix (South Korea, Year 2009, 1 billion won)

Income/ Expenditure Production Activities Production Commodities Labor Capital Household Corporate enterprise Government Combined enterprise Rest of World Error term Total

Production Activities 2,240,903 534,074 2,774,977 Production Commodities 1,727,071 575,970 170,325 279,285 2,752,651 Labor 493,686 872 494,558 Capital 310,604 20,129 330,733 Household 493,035 108,529 42,761 40,567 15,899

• 8,776

692,015 Corporate 207,473 14,696 19 222,187 Government 101,522 17,131 59,479 35,824 195 47,143 261,295 Combined enterprise 142,094 27,771 104,550 48,447

• 449
• 87,144

235,269 Rest of World 494,617 1,523 14,731 14,098 684 1,938

• 44,016

483,577 Error term 38,368

• 87,144
• 48,776

Total 2,774,977 2,752,651 494,558 330,733 692,015 222,187 261,295 235,269 483,577

• 48,776

Source: The Bank of Korea

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-2. Macro-SAM in 2000 and 2009 with Micro-SAM

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Table 6. Household Income Sources by Decile ( Year 2000 )

Equalization income by decile(2000) Gross income Wage Profit income Business transfer income Government transfer income Foreign transfer income Error term Unit of 1 0.004 0.008 0.011 0.009 0.255 0.061 0.002 Unit of 2 0.023 0.023 0.036 0.022 0.233 0.266 0.009 Unit of 3 0.043 0.043 0.036 0.015 0.119 0.134 0.021 Unit of 4 0.059 0.061 0.059 0.029 0.113 0.084 0.026 Unit of 5 0.075 0.077 0.098 0.016 0.064 0.068 0.037 Unit of 6 0.093 0.099 0.034 0.017 0.056 0.044 0.042 Unit of 7 0.112 0.117 0.079 0.043 0.044 0.054 0.044 Unit of 8 0.130 0.133 0.109 0.039 0.046 0.063 0.043 Unit of 9 0.164 0.168 0.133 0.072 0.042 0.052 0.083 Unit of 10 0.297 0.273 0.405 0.739 0.028 0.174 0.692 Total 1.000 1.000 1.000 1.000 1.000 1.000 1.000

Source: 2001 KLIPS data

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-2. Macro-SAM in 2000 and 2009 with Micro-SAM

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Table 7. Household Income Sources by Decile ( Year 2009 )

Equalization income by decile(2009) Gross income Wage Profit income Business transfer income Government transfer income Foreign transfer income Error term Unit of 1 0.010 0.011 0.015 0.009 0.255 0.093 0.005 Unit of 2 0.026 0.026 0.043 0.015 0.233 0.129 0.022 Unit of 3 0.044 0.043 0.051 0.036 0.119 0.095 0.015 Unit of 4 0.060 0.060 0.050 0.033 0.113 0.082 0.050 Unit of 5 0.074 0.077 0.038 0.084 0.064 0.064 0.026 Unit of 6 0.090 0.095 0.050 0.022 0.056 0.044 0.022 Unit of 7 0.108 0.113 0.044 0.075 0.044 0.065 0.062 Unit of 8 0.131 0.137 0.085 0.052 0.046 0.063 0.157 Unit of 9 0.165 0.169 0.097 0.219 0.042 0.105 0.121 Unit of 10 0.293 0.270 0.527 0.454 0.028 0.260 0.521 Total 1.000 1.000 1.000 1.000 1.000 1.000 1.000

Source: 2008 KLIPS data

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-2. Macro-SAM in 2000 and 2009 with Micro-SAM

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• The income distribution of profit for the highest income

deciles 40.5% ⇒ 52.7%

• The business transfer income for the highest income

deciles 73.9% ⇒ 45.4%

• The ratio of upper 20 % income to lower 20 % income

was 17.1 in 2000 and 12.1 in 2009 respectively.

• The wage income of the lower income deciles (Unit 1,2)

was only 3.1% in 2000 but improved to be 3.7% in 2009. (due to the welfare policies for the lower income groups)

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-2. Macro-SAM in 2000 and 2009 with Micro-SAM

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Table 8. Household Expenditure Distribution by Decile ( Year 2000 )

Equalization expenditure by decile (2000) Gross expenditure Consumption Business transfer expenditure Government transfer expenditure Savings Foreign transfer expenditure Unit of 1 0.043 0.050 0.021 0.015 0.010 0.025 Unit of 2 0.040 0.047 0.021 0.023 0.017 0.037 Unit of 3 0.057 0.064 0.043 0.044 0.031 0.056 Unit of 4 0.072 0.079 0.058 0.063 0.036 0.076 Unit of 5 0.084 0.089 0.082 0.083 0.056 0.087 Unit of 6 0.098 0.101 0.101 0.100 0.084 0.096 Unit of 7 0.112 0.112 0.131 0.119 0.091 0.112 Unit of 8 0.122 0.126 0.130 0.145 0.110 0.135 Unit of 9 0.151 0.140 0.157 0.170 0.188 0.151 Unit of 10 0.221 0.192 0.258 0.238 0.379 0.224 Total 1.000 1.000 1.000 1.000 1.000 1.000

Source: 2001 KLIPS data

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-2. Macro-SAM in 2000 and 2009 with Micro-SAM

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Table 9. Household Expenditure Distribution by Decile ( Year 2009 )

Equalization expenditure by decile (2009) Gross expenditure Consumption Business transfer expenditure Government transfer expenditure Savings Foreign transfer expenditure Unit of 1 0.053 0.038 0.008 0.015 0.002 0.025 Unit of 2 0.048 0.049 0.015 0.023 0.009 0.037 Unit of 3 0.055 0.064 0.031 0.044 0.025 0.056 Unit of 4 0.069 0.078 0.049 0.063 0.040 0.076 Unit of 5 0.080 0.089 0.070 0.083 0.059 0.087 Unit of 6 0.095 0.099 0.097 0.100 0.097 0.096 Unit of 7 0.112 0.118 0.115 0.119 0.120 0.112 Unit of 8 0.126 0.130 0.151 0.145 0.115 0.135 Unit of 9 0.145 0.143 0.182 0.170 0.189 0.151 Unit of 10 0.217 0.193 0.282 0.238 0.343 0.224 Total 1.000 1.000 1.000 1.000 1.000 1.000

Source: 2008 KLIPS data

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-2. Macro-SAM in 2000 and 2009 with Micro-SAM

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• The distribution structure of gross expenditure by 10

deciles changed in favor of lower income groups.

• The ratio of upper 20 % expenditure to lower 20 %

expenditure was 4.5 in 2000 and 3.6 in 2009 respectively.

• The gross expenditure of the lower income deciles (Unit

1,2) was only 8.3% in 2000 but improved to be 10.1% in 2009.

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-2. Macro-SAM in 2000 and 2009 with Micro-SAM

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• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-3. Multiplier Effects

Table 10. Multiplier Contribution ( ) to Income Distribution in Production (2000)

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M

Expenditure Income Production Activities Average Sensitivit y (1) Manufacturing low IT-intensity (2) Manufacturing high IT-intensity (3) Service low IT-intensity (4) Service high IT-intensity Production Activities

(1) Manufacturing low IT-intensity

1.791 0.770 0.639 0.661 0.965

(2) Manufacturing high IT-intensity

0.447 1.527 0.426 0.438 0.709

(3) Service low IT-intensity

0.172 0.170 1.188 0.203 0.433

(4) Service high IT-intensity

0.563 0.553 0.579 1.639 0.833 Total Effect 2.974 3.020 2.831 2.942

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Table 11. Multiplier Contribution ( ) to Income Distribution in Production (2009)

Expenditure Income Production Activities Average Sensitivit y (1) Manufacturing low IT-intensity (2) Manufacturing high IT-intensity (3) Service low IT-intensity (4) Service high IT-intensity Production Activities

(1) Manufacturing low IT-intensity

1.807 0.794 0.659 0.682 0.985

(2) Manufacturing high IT-intensity

0.427 1.554 0.417 0.411 0.702

(3) Service low IT-intensity

0.154 0.145 1.165 0.182 0.411

(4) Service high IT-intensity

0.635 0.624 0.667 1.759 0.921 Total Effect 3.022 3.116 2.907 3.034

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M

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-3. Multiplier Effects

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• Multiplier Income Effects on four sectors of

industries(Table 10 & 11)

▫ The multiplier effect is highest with the Sector (2) and lowest with the Sector (3). ▫ Each sector’s income multiplier sums in all four sectors have become larger in 2009 than in 2000. ▫ The sector (3) Service with low IT-intensity had the lowest average sensitivity, 0.433 and 0.411 respectively. ▫ Sector (3) Service with low-IT intensity(typical nature

• f non-tradable service sector) has both the lowest

average sensitivity and the lowest income multiplier effect

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-3. Multiplier Effects

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Table 12. Multiplier Contribution ( ) of Production to Household Income (2000)

Expenditure Income Production Activities Average Sensitivity (1) Manufacturing low IT-intensity (2) Manufacturing high IT-intensity (3) Service low IT-intensity (4) Service high IT-intensity Equalization household by decile Unit 1 0.006 0.005 0.007 0.007 0.006 Unit 2 0.017 0.015 0.021 0.020 0.018 Unit 3 0.026 0.024 0.033 0.032 0.029 Unit 4 0.039 0.036 0.049 0.048 0.043 Unit 5 0.051 0.047 0.065 0.063 0.056 Unit 6 0.050 0.047 0.067 0.063 0.057 Unit 7 0.067 0.062 0.087 0.083 0.075 Unit 8 0.078 0.073 0.102 0.098 0.088 Unit 9 0.100 0.093 0.130 0.125 0.112 Unit 10 0.224 0.206 0.275 0.271 0.244 Total Effect 0.657 0.607 0.835 0.810

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• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-3. Multiplier Effects

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Table 13. Multiplier Contribution ( ) of Production to Household Income (2009)

Expenditure Income Production Activities Average Sensitivity (1) Manufacturing low IT-intensity (2) Manufacturing high IT-intensity (3) Service low IT-intensity (4) Service high IT-intensity Equalization household by decile Unit 1 0.007 0.006 0.009 0.009 0.008 Unit 2 0.016 0.015 0.021 0.021 0.018 Unit 3 0.025 0.023 0.034 0.032 0.028 Unit 4 0.031 0.029 0.043 0.041 0.036 Unit 5 0.039 0.036 0.054 0.051 0.045 Unit 6 0.045 0.042 0.064 0.060 0.053 Unit 7 0.054 0.050 0.077 0.071 0.063 Unit 8 0.067 0.062 0.094 0.088 0.078 Unit 9 0.089 0.082 0.123 0.116 0.102 Unit 10 0.186 0.170 0.244 0.238 0.210 Total Effect 0.559 0.515 0.763 0.727

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M

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-3. Multiplier Effects

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• Multiplier contribution of production to household

income by 10-decile groups(Table 12 & 13)

▫ Total multiplier contribution was highest in sector (3) lower IT-intensity service sector such as Construction, Transportation and Storage, Real Estate and

• Government. Lower intermediate inputs and higher

value-added) ▫ The multiplier effects of production to household income have become smaller in 2009 than in 2000. ▫ The average sensitivity by each unit of household is larger as we move to upper income units.

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-3. Multiplier Effects

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Table 14. Multiplier Contribution ( ) of Household to Production Income (2000)

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Expenditure Income Equalization household by decile

Average Sensitivi ty

Unit 1 Unit 2 Unit 3 Unit 4 Unit 5 Unit 6 Unit 7 Unit 8 Unit 9 Unit 10

Production Activities (1) Manufacturing low IT-intensity

0.842 0.810 0.785 0.778 0.758 0.739 0.735 0.728 0.696 0.657 0.753

(2) Manufacturing high IT-intensity

0.558 0.536 0.520 0.511 0.498 0.486 0.483 0.477 0.455 0.430 0.495

(3) Service low IT-intensity

0.272 0.262 0.254 0.247 0.240 0.235 0.232 0.229 0.219 0.208 0.240

(4) Service high IT-intensity

0.791 0.773 0.755 0.743 0.721 0.708 0.702 0.697 0.666 0.632 0.719

Total Effect

2.463 2.381 2.314 2.281 2.216 2.167 2.153 2.131 2.035 1.927

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-3. Multiplier Effects

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Table 15. Multiplier Contribution ( ) of Household to Production Income (2009)

Expenditure Income Equalization household by decile

Average Sensitivi ty

Unit 1 Unit 2 Unit 3 Unit 4 Unit 5 Unit 6 Unit 7 Unit 8 Unit 9 Unit 10

Production Activities (1) Manufacturing low IT-intensity

0.845 0.829 0.798 0.781 0.766 0.747 0.747 0.740 0.720 0.701 0.767

(2) Manufacturing high IT-intensity

0.529 0.516 0.496 0.480 0.471 0.459 0.459 0.452 0.440 0.428 0.473

(3) Service low IT-intensity

0.234 0.229 0.221 0.213 0.208 0.203 0.202 0.200 0.194 0.191 0.210

(4) Service high IT-intensity

0.884 0.882 0.857 0.834 0.814 0.800 0.798 0.793 0.771 0.755 0.819

Total Effect

2.493 2.457 2.372 2.308 2.258 2.209 2.206 2.184 2.126 2.075

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-3. Multiplier Effects

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• Multiplier Contribution of Household to Production

Income (Table 14 & 15)

▫ The multiplier contribution by income injected to each household income unit example by a government’s welfare policy produces larger multiplier effects across production units with lower-income units. ▫ The sensitivity of such income injection to all income unit on each production sector produces higher sensitivities in the low IT-intensity Manufacturing and the high IT-intensity Service sectors.

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-3. Multiplier Effects

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Table 16. Multiplier Contribution ( ) to Income Distribution in Household (2000)

Expenditure Income Equalization household by decile Average Sensitivity Unit 1 Unit 2 Unit 3 Unit 4 Unit 5 Unit 6 Unit 7 Unit 8 Unit 9 Unit 10 Equalization household by decile Unit 1 1.005 0.005 0.005 0.005 0.005 0.005 0.005 0.004 0.004 0.004 0.105 Unit 2 0.015 1.015 0.015 0.014 0.014 0.014 0.014 0.013 0.013 0.012 0.114 Unit 3 0.024 0.023 1.023 0.022 0.022 0.021 0.021 0.021 0.020 0.019 0.121 Unit 4 0.036 0.035 0.034 1.033 0.032 0.032 0.031 0.031 0.030 0.028 0.132 Unit 5 0.047 0.045 0.044 0.044 1.042 0.041 0.041 0.041 0.039 0.037 0.142 Unit 6 0.047 0.046 0.044 0.044 0.042 1.042 0.041 0.041 0.039 0.037 0.142 Unit 7 0.062 0.060 0.059 0.058 0.056 0.055 1.055 0.054 0.052 0.049 0.156 Unit 8 0.073 0.071 0.069 0.068 0.066 0.064 0.064 1.063 0.061 0.057 0.166 Unit 9 0.093 0.090 0.088 0.086 0.084 0.082 0.082 0.081 1.077 0.073 0.184 Unit 10 0.205 0.199 0.194 0.191 0.186 0.183 0.182 0.180 0.172 1.164 0.286 Total Effect 1.608 1.589 1.574 1.565 1.549 1.538 1.535 1.529 1.506 1.480

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• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-3. Multiplier Effects

SLIDE 33

Table 17. Multiplier Contribution ( ) to Income Distribution in Household (2009)

Expenditure Income Equalization household by decile Average Sensitivity Unit 1 Unit 2 Unit 3 Unit 4 Unit 5 Unit 6 Unit 7 Unit 8 Unit 9 Unit 10 Equalization household by decile Unit 1 1.006 0.006 0.006 0.006 0.006 0.006 0.006 0.005 0.005 0.005 0.106 Unit 2 0.015 1.015 0.014 0.014 0.014 0.013 0.013 0.013 0.013 0.013 0.114 Unit 3 0.023 0.023 1.022 0.022 0.021 0.021 0.021 0.021 0.020 0.020 0.121 Unit 4 0.029 0.029 0.028 1.027 0.027 0.026 0.026 0.026 0.025 0.025 0.127 Unit 5 0.037 0.036 0.035 0.034 1.034 0.033 0.033 0.033 0.032 0.031 0.134 Unit 6 0.043 0.043 0.041 0.040 0.039 1.038 0.038 0.038 0.037 0.036 0.139 Unit 7 0.052 0.051 0.050 0.048 0.047 0.046 1.046 0.046 0.045 0.044 0.147 Unit 8 0.064 0.063 0.061 0.060 0.058 0.057 0.057 1.057 0.055 0.054 0.159 Unit 9 0.084 0.083 0.081 0.079 0.077 0.076 0.075 0.075 1.073 0.072 0.177 Unit 10 0.173 0.172 0.166 0.162 0.159 0.156 0.155 0.154 0.150 1.147 0.260 Total Effect 1.527 1.522 1.505 1.492 1.481 1.472 1.471 1.468 1.456

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• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-3. Multiplier Effects

SLIDE 34

• Inter-household multiplier contribution to income

(Table 16 & 17)

▫ The lowest income unit (Unit of 1) has the largest income effect. (Their consumption expenditure to income increase is more sensitive) ▫ If an equal amount was injected across all units of income decile, the highest income unit gains the most. ▫ Average sensitivity becomes higher from lower income units to higher one.

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-3. Multiplier Effects

SLIDE 35

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-4. Redistribution Effects

Table 18. Zero-sum Redistribution Effects (2000)

Expenditure

Income Production Activities Production Commodities

Labor Capital Household Corporate Enterprise (1) Manufacturing low IT- intensity (2) Manufacturing high IT- Intensity (3) Service low IT- intensity (4) Service high IT- intensity (1) Manufacturing low IT- intensity (2) Manufacturing high IT- intensity (3) Service low IT- intensity (4) Service high IT- intensity Production Activities (1) Manufacturing low IT-intensity

0.858

• 0.155
• 0.294
• 0.299

0.211 0.003

• 0.126
• 0.189
• 0.325
• 0.305 -1.967 -0.174

(2) Manufacturing high IT-intensity

• 0.346

0.739

• 0.367
• 0.378
• 0.245

0.035

• 0.207
• 0.297
• 0.415
• 0.332 -3.119 -0.178

(3) Service low IT-intensity

• 0.062
• 0.063

0.954

• 0.038
• 0.048
• 0.051

0.101 0.052

• 0.035
• 0.052

0.012 -0.034

(4) Service high IT-intensity

• 0.080
• 0.086
• 0.065

0.977

• 0.022
• 0.042

0.170 0.340

• 0.033
• 0.110

0.641 -0.079

Production Commoditi es (1) Manufacturing low IT-intensity

0.301 0.121

• 0.079
• 0.089

1.036 0.012

• 0.056
• 0.093
• 0.091
• 0.158

0.212 -0.105

(2) Manufacturing high IT-intensity

• 0.048

0.225

• 0.068
• 0.095
• 0.079

0.995

• 0.071
• 0.101
• 0.146
• 0.149 -0.781 -0.087

(3) Service low IT-intensity

• 0.362
• 0.367
• 0.267
• 0.295
• 0.346
• 0.376

0.606

• 0.373
• 0.232
• 0.213 -1.264 -0.121

(4) Service high IT-intensity

• 0.088
• 0.112
• 0.018

0.095

• 0.145
• 0.160
• 0.119

0.912 0.037

• 0.083

1.352 -0.072

Labor

• 0.058
• 0.080

0.113 0.059

• 0.097
• 0.108
• 0.062
• 0.048

0.804

• 0.175 -1.287 -0.098

Capital

0.021

• 0.020

0.037 0.050

• 0.038
• 0.048
• 0.030
• 0.023
• 0.131

0.877 -0.798 -0.070

Household

• 0.145
• 0.189

0.034

• 0.015
• 0.204
• 0.229
• 0.186
• 0.165

0.624 0.223 7.314 0.055

Corporate Enterprise

0.009

• 0.014

0.021 0.028

• 0.024
• 0.030
• 0.019
• 0.015
• 0.058

0.478 -0.314 0.964

Column Sum

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

SLIDE 36

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-4. Redistribution Effects

Table 19. Zero-sum Redistribution Effects (2009)

Expenditure

Income Production Activities Production Commodities

Labor Capital Household Corporate Enterprise (1) Manufacturing low IT- intensity (2) Manufacturing high IT- Intensity (3) Service low IT- intensity (4) Service high IT- intensity (1) Manufacturing low IT- intensity (2) Manufacturing high IT- intensity (3) Service low IT- intensity (4) Service high IT- intensity Production Activities (1) Manufacturing low IT-intensity

0.910

• 0.112
• 0.252
• 0.259

0.239 0.023

• 0.078
• 0.145 -0.285 -0.278 -1.587 -0.157

(2) Manufacturing high IT-intensity

• 0.512

0.605

• 0.537
• 0.575
• 0.392
• 0.073
• 0.377
• 0.536 -0.618 -0.433 -4.971 -0.225

(3) Service low IT-intensity

• 0.040
• 0.050

0.968

• 0.021
• 0.023
• 0.047

0.094 0.052 -0.020 -0.042 0.096 -0.026

(4) Service high IT-intensity

• 0.027
• 0.045
• 0.006

1.065 0.016

• 0.009

0.241 0.473 0.034 -0.096 1.352 -0.070

Production Commoditi es (1) Manufacturing low IT-intensity

0.373 0.159

• 0.041
• 0.053

1.071 0.048

• 0.012
• 0.061 -0.059 -0.155 0.534 -0.099

(2) Manufacturing high IT-intensity

• 0.085

0.277

• 0.091
• 0.161
• 0.109

1.003

• 0.097
• 0.162 -0.191 -0.176 -1.171 -0.098

(3) Service low IT-intensity

• 0.384
• 0.418
• 0.305
• 0.337
• 0.358
• 0.405

0.568

• 0.411 -0.263 -0.224 -1.562 -0.124

(4) Service high IT-intensity

• 0.055
• 0.091

0.026 0.186

• 0.116
• 0.137
• 0.072

0.981 0.076 -0.090 1.768 -0.070

Labor

• 0.066
• 0.100

0.118 0.048

• 0.099
• 0.120
• 0.072
• 0.050

0.803 -0.168 -1.313 -0.093

Capital

0.000

• 0.036

0.022 0.050

• 0.042
• 0.055
• 0.034
• 0.019 -0.118

0.894 -0.733 -0.059

Household

• 0.113
• 0.163

0.081 0.022

• 0.158
• 0.190
• 0.138
• 0.109

0.698 0.202 7.908 0.057

Corporate Enterprise

• 0.001
• 0.025

0.017 0.033

• 0.029
• 0.038
• 0.023
• 0.013 -0.057

0.566 -0.321 0.965

Column Sum

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

SLIDE 37

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-4. Redistribution Effects

• Properties
• All diagonal terms : positive
• Most of off-diagonal terms : negative
• Column sums equal to zero
• Example : The redistribution effect of the High IT-

intensity Manufacturing production on other accounts : It produces all negative redistribution effects except its own and Low IT-intensity products

SLIDE 38

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-4. Redistribution Effects

Table 20. Redistributed Income Matrix ( ) in Production (2000)

( ' )

m mm

e Y R

Expenditure Income Production Activities Average Sensitivity (1) Manufacturing low IT-intensity (2) Manufacturing high IT-intensity (3) Service low IT-intensity (4) Service high IT-intensity Production Activities

(1) Manufacturing low IT-intensity

0.858

• 0.155
• 0.294
• 0.299

0.027

(2) Manufacturing high IT-intensity

• 0.346

0.739

• 0.367
• 0.378
• 0.088

(3) Service low IT-intensity

• 0.062
• 0.063

0.954

• 0.038

0.198

(4) Service high IT-intensity

• 0.080
• 0.086
• 0.065

0.977 0.187 Total Effect 0.369 0.436 0.227 0.262

(1) The Redistribution Effects of Production Activity on Its Own Accounts

SLIDE 39

Table 21. Redistributed Income Matrix ( ) in Production (2009)

Expenditure Income Production Activities Average Sensitivity (1) Manufacturing low IT-intensity (2) Manufacturing high IT-intensity (3) Service low IT-intensity (4) Service high IT-intensity Production Activities

(1) Manufacturing low IT-intensity

0.910

• 0.112
• 0.252
• 0.259

0.072

(2) Manufacturing high IT-intensity

• 0.512

0.605

• 0.537
• 0.575
• 0.255

(3) Service low IT-intensity

• 0.040
• 0.050

0.968

• 0.021

0.214

(4) Service high IT-intensity

• 0.027
• 0.045
• 0.006

1.065 0.247 Total Effect 0.330 0.397 0.173 0.210

( ' )

m mm

e Y R

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-4. Redistribution Effects

(1) The Redistribution Effects of Production Activity on Its Own Accounts

SLIDE 40

• (Table 20 & 21)

▫ Higher IT-intensity Manufacturing sector has the highest income redistribution effect. (0.436 and 0.397) ; dominant own redistribution effect. (0.739 and 0.605) ▫ Higher IT-intensity Manufacturing sector has the lowest sensitivity. (negative -0.088 and -0.255 ) ▫ When income is injected to production activity, the lower IT-intensity Service sector has the lowest column sum like the sector’s multiplier effects (decreasing, 0.227 and 0.173 )

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-4. Redistribution Effects

(1) The Redistribution Effects of Production Activity on Its Own Accounts

SLIDE 41

Table 22. Redistributed Income Effect ( ) of Production on Household Income (2000)

Expenditure Income Production Activities Average Sensitivity (1) Manufacturing low IT-intensity (2) Manufacturing high IT-intensity (3) Service low IT-intensity (4) Service high IT-intensity Equalization household by decile Unit 1

• 0.006
• 0.007
• 0.005
• 0.006
• 0.006

Unit 2

• 0.010
• 0.011
• 0.006
• 0.007
• 0.008

Unit 3

• 0.008
• 0.009

0.000

• 0.002
• 0.005

Unit 4

• 0.008
• 0.010

0.003 0.000

• 0.004

Unit 5

• 0.008
• 0.012

0.006 0.002

• 0.003

Unit 6

• 0.010
• 0.013

0.007 0.002

• 0.003

Unit 7

• 0.010
• 0.015

0.010 0.004

• 0.003

Unit 8

• 0.011
• 0.016

0.012 0.006

• 0.002

Unit 9

• 0.015
• 0.021

0.015 0.006

• 0.004

Unit 10

• 0.059
• 0.075
• 0.008
• 0.020
• 0.040

Total Effect

• 0.145
• 0.189

0.034

• 0.015

( ' )

m mm

e Y R

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-4. Redistribution Effects

(2) Redistribution Effects of Production Activity on Household Income

SLIDE 42

Table 23. Redistributed Income Effect ( ) of Production on Household Income (2009)

Expenditure Income Production Activities Average Sensitivity (1) Manufacturing low IT-intensity (2) Manufacturing high IT-intensity (3) Service low IT-intensity (4) Service high IT-intensity Equalization household by decile Unit 1

• 0.012
• 0.013
• 0.010
• 0.011
• 0.011

Unit 2

• 0.013
• 0.014
• 0.008
• 0.009
• 0.011

Unit 3

• 0.009
• 0.011

0.000

• 0.003
• 0.006

Unit 4

• 0.009
• 0.012

0.002

• 0.002
• 0.005

Unit 5

• 0.009
• 0.012

0.006 0.001

• 0.003

Unit 6

• 0.009
• 0.013

0.009 0.003

• 0.003

Unit 7

• 0.010
• 0.015

0.011 0.004

• 0.002

Unit 8

• 0.011
• 0.016

0.015 0.007

• 0.001

Unit 9

• 0.014
• 0.021

0.019 0.009

• 0.002

Unit 10

• 0.018
• 0.036

0.037 0.024 0.002 Total Effect

• 0.113
• 0.163

0.081 0.022

( ' )

m mm

e Y R

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-4. Redistribution Effects

(2) Redistribution Effects of Production Activity on Household Income

SLIDE 43

• (Table 22 & 23)

▫ Table 22 and 23 are the results of redistributed income effects of production activity in four sectors on household income by ten income units. ▫ In both 2000 and 2009, the low IT-intensity Service sector has generated the largest total income redistribution effect (0.034 and 0.081 respectively). ▫ It should be noted that the income redistribution of the High IT- intensity Manufacturing sector has produced the strongest negative effects across all income units (-0.189 in 2000 and ▫ -0.163 in 2009) ▫ The negative effects were larger as we move from lower-income units to higher-income units.

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-4. Redistribution Effects

(2) Redistribution Effects of Production Activity on Household Income

SLIDE 44

• (Table 22 & 23)

▫ In terms of average sensitivity, the highest income group, Unit 10, has had the largest negative sensitivity (-0.040) in 2000 but it became the

• nly positive sensitivity (0.002) in 2009.

▫ The average sensitivity which measures how income generated by each production sector gets redistributed to a particular income unit tends to move from higher negative numbers to lower negative numbers as we move from lower-income units to higher-income units implying that lower-income units’ income get negatively redistributed from income generated by each production sector. ▫ The highest-income unit (Unit 10) had the largest negative average sensitivity (-0.040) in 2000 but turns around to have a positive average sensitivity (0.002) in 2009 : Unit 10 was the biggest beneficiary of two financial crises and the IT boom in-between.

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-4. Redistribution Effects

(2) Redistribution Effects of Production Activity on Household Income

SLIDE 45

Table 24. Redistributed Income Effect ( ) in Household (2000)

( ' )

m mm

e Y R

Expenditure Income Equalization household by decile

Average Sensitivi ty

Unit 1 Unit 2 Unit 3 Unit 4 Unit 5 Unit 6 Unit 7 Unit 8 Unit 9 Unit 10

Production Activities (1) Manufacturing low IT-intensity

• 0.200 -0.202 -0.203 -0.198 -0.195 -0.196 -0.195 -0.195 -0.191 -0.191 -0.197

(2) Manufacturing high IT-intensity

• 0.328 -0.324 -0.320 -0.319 -0.313 -0.310 -0.309 -0.307 -0.299 -0.291 -0.312

(3) Service low IT-intensity

0.010 0.007 0.006 0.002 0.000 0.000 -0.002 -0.003 -0.004 -0.004 0.001

(4) Service high IT-intensity

0.073 0.075 0.073 0.070 0.063 0.063 0.061 0.061 0.054 0.048 0.064

Total Effect

• 0.446 -0.444 -0.444 -0.445 -0.444 -0.444 -0.445 -0.443 -0.440 -0.438
• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-4. Redistribution Effects

(3) Redistribution Effects of Household Income on Production Sectors

SLIDE 46

Table 25. Redistributed Income Effect ( ) in Household (2009)

( ' )

m mm

e Y R

Expenditure Income Equalization household by decile

Average Sensitivi ty

Unit 1 Unit 2 Unit 3 Unit 4 Unit 5 Unit 6 Unit 7 Unit 8 Unit 9 Unit 10

Production Activities (1) Manufacturing low IT-intensity

• 0.156 -0.161 -0.163 -0.158 -0.157 -0.159 -0.158 -0.158 -0.157 -0.159 -0.159

(2) Manufacturing high IT-intensity

• 0.520 -0.521 -0.511 -0.504 -0.495 -0.490 -0.489 -0.488 -0.479 -0.473 -0.497

(3) Service low IT-intensity

0.018 0.016 0.014 0.010 0.008 0.008 0.007 0.006 0.005 0.005 0.010

(4) Service high IT-intensity

0.145 0.151 0.148 0.140 0.133 0.131 0.130 0.130 0.123 0.120 0.135

Total Effect

• 0.514 -0.514 -0.512 -0.512 -0.511 -0.510 -0.510 -0.511 -0.509 -0.507
• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-4. Redistribution Effects

(3) Redistribution Effects of Household Income on Production Sectors

SLIDE 47

• (Table 24 & 25)

▫ (When household income increasing by government’s welfare redistribution policy) Some positive redistribution effects of lower-income units’ income on two service sectors. ▫ The welfare policy provides benefits largely to service sectors only. ▫ Average sensitivities by two service sectors are positive in both 2000 and 2009.

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-4. Redistribution Effects

(3) Redistribution Effects of Household Income on Production Sectors

SLIDE 48

Table 26. Redistributed Income Effect ( ) in Household (2000)

Expenditure Income

Equalization household by decile

Average Sensitivity Unit 1 Unit 2 Unit 3 Unit 4 Unit 5 Unit 6 Unit 7 Unit 8 Unit 9 Unit 10

Equalization household by decile

Unit 1 0.992

• 0.008
• 0.008
• 0.008
• 0.008
• 0.008
• 0.007
• 0.007
• 0.007
• 0.007

0.092 Unit 2

• 0.014

0.986

• 0.014
• 0.014
• 0.013
• 0.013
• 0.013
• 0.013
• 0.013
• 0.012

0.087 Unit 3

• 0.014
• 0.013

0.987

• 0.013
• 0.013
• 0.012
• 0.012
• 0.012
• 0.012
• 0.012

0.087 Unit 4

• 0.016
• 0.015
• 0.015

0.985

• 0.015
• 0.015
• 0.015
• 0.015
• 0.014
• 0.014

0.085 Unit 5

• 0.019
• 0.019
• 0.018
• 0.018

0.982

• 0.018
• 0.018
• 0.018
• 0.017
• 0.017

0.082 Unit 6

• 0.020
• 0.019
• 0.019
• 0.019
• 0.019

0.982

• 0.018
• 0.018
• 0.018
• 0.017

0.081 Unit 7

• 0.024
• 0.023
• 0.023
• 0.023
• 0.023
• 0.022

0.978

• 0.022
• 0.022
• 0.021

0.078 Unit 8

• 0.027
• 0.027
• 0.026
• 0.026
• 0.026
• 0.025
• 0.025

0.975

• 0.025
• 0.024

0.074 Unit 9

• 0.035
• 0.035
• 0.034
• 0.034
• 0.033
• 0.033
• 0.033
• 0.033

0.968

• 0.031

0.067 Unit 10

• 0.111
• 0.108
• 0.106
• 0.105
• 0.103
• 0.101
• 0.100
• 0.100
• 0.097

0.907

• 0.002

Total Effect 0.712 0.719 0.724 0.726 0.730 0.734 0.735 0.737 0.743 0.752

( ' )

m mm

e Y R

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-4. Redistribution Effects

(4) Redistribution Effects of Household income on its Own Accounts

SLIDE 49

Table 27. Redistributed Income Effect ( ) in Household (2009)

Expenditure Income

Equalization household by decile

Average Sensitivity Unit 1 Unit 2 Unit 3 Unit 4 Unit 5 Unit 6 Unit 7 Unit 8 Unit 9 Unit 10

Equalization household by decile

Unit 1 0.986

• 0.014
• 0.014
• 0.014
• 0.013
• 0.013
• 0.013
• 0.013
• 0.013
• 0.012

0.087 Unit 2

• 0.017

0.983

• 0.016
• 0.016
• 0.016
• 0.015
• 0.015
• 0.015
• 0.015
• 0.015

0.084 Unit 3

• 0.014
• 0.014

0.986

• 0.013
• 0.013
• 0.013
• 0.013
• 0.013
• 0.013
• 0.012

0.087 Unit 4

• 0.016
• 0.016
• 0.015

0.985

• 0.015
• 0.015
• 0.015
• 0.014
• 0.014
• 0.014

0.085 Unit 5

• 0.016
• 0.016
• 0.015
• 0.015

0.985

• 0.015
• 0.015
• 0.015
• 0.014
• 0.014

0.085 Unit 6

• 0.018
• 0.017
• 0.017
• 0.017
• 0.017

0.984

• 0.016
• 0.016
• 0.016
• 0.016

0.083 Unit 7

• 0.020
• 0.020
• 0.019
• 0.019
• 0.019
• 0.019

0.981

• 0.018
• 0.018
• 0.018

0.081 Unit 8

• 0.023
• 0.023
• 0.022
• 0.022
• 0.022
• 0.022
• 0.022

0.979

• 0.021
• 0.021

0.078 Unit 9

• 0.030
• 0.030
• 0.029
• 0.029
• 0.028
• 0.028
• 0.028
• 0.028

0.973

• 0.027

0.072 Unit 10

• 0.055
• 0.054
• 0.053
• 0.052
• 0.052
• 0.051
• 0.051
• 0.050
• 0.050

0.951 0.049 Total Effect 0.777 0.781 0.786 0.789 0.791 0.794 0.794 0.796 0.799 0.802

( ' )

m mm

e Y R

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-4. Redistribution Effects

(4) Redistribution Effects of Household income on its Own Accounts

SLIDE 50

• (Table 26 & 27 )

▫ The total redistribution effect is the largest in the highest income unit and became smaller as we move lower income

• units. (The total effect was larger in 2009 than in 2000)

▫ Average sensitivity moved in the opposite direction becoming lower as we move from lower income units to higher ones. (the higher income units derive higher redistribution effects) ▫ The redistribution effect becomes more sensitive with lower income groups because their income level are at lower level ; average sensitivity of Unit 10 was negative (-0.002) in 2000 but it became positive (0.049) in 2009 (after the global financial crisis, the highest income unit (Unit 10) has become net gainers)

• 3. Multiplier Effects and Income Redistribution Effects

in Korea (2000 and 2009) 3-4. Redistribution Effects

(4) Redistribution Effects of Household income on its Own Accounts

SLIDE 51

• 4. Conclusion
• Examined the impact of two financial crises and

IT revolution on multiplier effects and redistribution effects of both production sectors and household income units in Korea for the period of 2000-2011

• As a consequence of depreciation in the post-

crisis periods, there was a strong export performance in higher IT-intensity Manufacturing Sector. This has generated a strong exogenous impact on four endogenous sectors of production.

SLIDE 52

• 4. Conclusion
• In analysis of multiplier effects,

▫ Service with low-IT intensity has both the lowest average sensitivity and the lowest income multiplier effect. ▫ The multiplier effects of production to household income have become smaller in 2009 than in 2000. ▫ The average sensitivity by each unit of household is larger as we move to upper income units.

SLIDE 53

• 4. Conclusion
• In analysis of redistribution effects,

▫ The lower IT-intensity Service sector has generated the largest total income redistribution effect.(0.034 and 0.081) ▫ In terms of average sensitivity, the highest income group, Unit 10, has had the largest negative sensitivity. (-0.040 and 0.002) ▫ The total redistribution effect is the largest in the highest income unit and became smaller as we move lower income units. ▫ When income is injected to household account, the higher income units derive higher redistribution effects.

SLIDE 54

• 4. Conclusion
• In analysis of redistribution effects,

▫ Increasing globalization of production activities in Korea and IT-intensity deepening has generated more redistribution effect in favor of higher income units. ▫ The overall indicator of income disparity has not been worsened between 2000 and 2009 after two financial crises. ▫ When we measure it as the ratio of upper 20 percent income divided by lower 20 % income, the income disparity has been narrowed.