This study proposes a variety of policy tasks to guarantee more efficient and productive use of public expenditures in the new age of active fiscal policy-making.
In any country, economic growth plays an important role in poverty reduction, and redistributive measures contribute to stronger growth by correcting market failures and facilitating social integration. Greater emphasis should be placed on the policies that ensure equal opportunities and higher social mobility. Therefore, the government’s approach to child-care and primary/secondary education has significant meaning in this respect. The educational gaps among income groups lead to greater socio-economic gaps, creating a vicious cycle. From this standpoint, Korea’s child-care policies leave much to be desired. Current state support for national/public child-care facilities is not restricted to income groups who need them the most. The ceilings on child-care fees and the limitations on commercial entities to enter child-care markets are preventing the market and its services from expanding and improving. Redistributive measures should address lower income groups. Korea’s national pension programs are also not helping those who need them the most. Health insurance programs suffer from low efficiency and other negative side effects stemming from uniform provision of support to district subscribers. Housing and credit guarantee policies do not have clear target groups. These programs must be reformed in such a way that most benefits can go to the much-needed lower income groups.
In many advanced countries, a high proportion of welfare spending goes to elderly groups, especially when considering the high levels of public pension benefits. This is likely to reduce their saving rates and hamper their economic growth through increased burden on the public. Welfare spending for the workers in those countries also provide a significant level of benefits to the middle/upper class as well as lower income groups. Korea should benchmark some of these examples and use caution when expanding its welfare programs. At a time when the country’s rapidly aging population is expected to see fiscal burdens increase sharply and slow down economic growth, it is imperative that the government minimize the negative impact of tax and social welfare systems on savings, labor supply and investment.
2005년 국가예산과 정책목표(National budget and policy objectives in 2005)
중장기 정책우선순위와 재정운영방향(Mid/long-term policy priorities and fiscal policy direction)
|Series Title; No||정책포럼 / 2005-06|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||KDI; KDI School|