Three essays on development issues

inequality, poverty, and well-being

HWANG, Sooyoung

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This dissertation presents the empirical results of a series of studies on the development issues such as income inequality, poverty, and employee’s well-being. The objective of this study is to examine empirical evidence of how technological progress affect income inequality in advanced countries as well as poverty reduction in developing countries, and further to explore the effect of work hour reduction policy on employee well-being. This will enable us to expand our understanding on the effects of technological progress on socio-economic outcomes as well as the impact of labor market policy on worker’s satisfaction. This thesis consists of three chapters under the broad banner of three essays on development issues: inequality, poverty, and well-being.

The first essay, Innovation and Top Income Inequality: Evidence from OECD Countries, aims to explore the effect of innovation on top income inequality in OECD countries over the period of 1980-2017. Innovation is proxied by the number of patent application. Top income inequality is expressed by top 0.1%, 0.5%, 1%, 10% income shares. Sample countries are 34 high-income countries as most innovations occur in these countries. Using cross-country panel and 2SLS estimations to deal with the endogeneity, I found that innovation has positive and significant impact on top income shares in rich countries. These results are also robust using alternative innovation variables such as patent grant and patent citation data. Based on this finding, I propose three kinds of policy options to reduce rising top income inequality: prevent tax loopholes used by the richest and strengthen tax progressivity for the top riches, lastly enhance educational reforms to improve moral values and thus reduce corruptions.

The second essay, Financial Innovation, Financial Inclusion, and Poverty: Evidence from Developing Countries, explores the links between financial innovation and poverty in developing countries. For this, a panel was set up for 103 developing countries over the period of 2004-2018. To address endogeneity, OLS with fixed effects and instrument variable strategy are used. As external instruments, latitude of capital city and legal origins are used for European ex-colonies. The results show that financial innovation measured by Financial Inclusion Index shows negative and significant effects on poverty. This is robust when using alternative Financial Development Index created by IMF. Thus, financial innovation is a useful tool for poverty reduction in developing countries. This implies that financial innovation enhances financial inclusion through easier access to finance, which brings about growth and reduces poverty. This encourages developing countries to make efforts on boosting financial innovation to address poverty issue.

The third essay, The Effect of Work Hour Reduction on Employee Satisfaction: The Case of Working Hour Reduction Policy in Korea, investigates the effect of standard 40-hour workweek policy on workers’ subjective well-being in Korea. The essential part of the policy was to reduce legal work hour per week from 44 to 40 hours, aiming to improve workers’ quality of lives. The policy was implemented in time order by industry and firm size from 2004 through 2011. This policy setting provides us a good opportunity to explore the causal impact of the policy by using DID (difference-in-difference) analysis. I use Korea Labor and Income Panel Study (KLIPS) data to estimate the effect of the policy on life and job satisfaction by applying DID estimation method. I found that the policy has significant effect on life satisfaction with leisure and family income while negative effects on job satisfaction overall. This result is also robust when the dependent variables are converted into binary variables.

Lee, Si Wook
KDI School, Ph.D in Development Policy
Issue Date
KDI School
Thesis(Doctoral) -- KDI School: Ph.D in Development Policy, 2022
Equality--Economic aspects; Income distribution; Job satisfaction
- Chapter 1: Innovation and Top Income Inequality: Evidence from OECD Countries, 1980-2017

- Chapter 2: Financial Innovation, Financial Inclusion, and Poverty: Evidence from 103 developing countries

- Chapter 3: The Effect of Work Hour Reduction Policy on Employee Satisfactions: The Case of Work Hour Reduction in Korea
126 p
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