Dynamics of Asset Poverty in South Korea

Following the Asian Financial Crisis of 1997, Korea has suffered what many consider to be a severe poverty problem. Despite policy efforts to reduce poverty and economic recovery in the early 2000s, poverty affects many households and certain households are at risk of staying in poverty once they are in it. Using longitudinal panel data from 2005 to 2014, this study defines three indicators of poverty based on asset holdings, rather than income. It then examines the dynamics of asset poverty in Korea across the study period. The study’s primary goal is to reveal differences across the three indicators and identify which groups of poor people in Korea have been structurally trapped in poverty. We applied a dynamic panel model of discrete choice to the Korean Welfare Panel Study (KOWEPS) from the 1st to 10th waves and show that, despite the indicator, the asset poor who experienced asset poverty in the previous surveyed year or at wave 1 are likely to fall into structural and persistent poverty over time. In addition, the probability of incurring asset poverty decreased with home ownership, higher disposable income, and greater diversification of the household portfolio. Future research should study the duration of asset poverty to complete a comprehensive picture of the asset poverty condition.