How did contrasting approaches to income inequality shape the economic growth of China and South Korea?

Abstract

The dissertation is a qualitative study that explores the complex relationship between income inequality and economic growth, with a comparative focus on China and South Korea. The research responds to the decadeslong controversy regarding inequality in development economics, specifically whether it is an obstacle to economic growth or, in certain circumstances, a catalyst for economic transformation. The research relies on secondary works, particularly policy reports. It employs a thematic analysis framework to address five main themes: human capital and productivity, social stability and institutions, investment and growth incentives, redistribution and policy models, and nonlinear or structural constraints. There is an inverted trajectory (analysis). In China, inequality has, in some ways, contributed to the country’s rapid growth, allowing it to concentrate investments, primarily through the use of Special Economic Zones and export-led growth. Nevertheless, the weakness of such a model is disclosed by structural imbalances and risks of social instability. In South Korea, both equity and growth have been supported by inclusive institutions, land reforms, and long-term investment in human capital, which has provided an alternative development process that reduces inequality without harming competitiveness. Evidence from Brazil and other regions is also included to put things into perspective, given that the impact of inequality depends on the capacity of institutions in society, as well as political stability and the level of development. The dissertation concludes that inequality could bring about a temporary economic boost, but ongoing or increased inequality forms a hindrance to long-term growth, stability, and inclusiveness. These have policy implications, such as reinforcing redistribution systems, placing greater emphasis on human capital growth, and institutionalizing frameworks to serve the purposes of efficiency and equity. In the future, the study could utilize primary data to complement the qualitative findings, in addition to adopting a triangulation enexercise with the econometric data. The paper is part of the literature on inclusive growth, showing a combination of positive and derogatory roles of inequality, which are highly context-, institutional-, and policy-dependent.