Analyzing household income mobility in South Korea using high‐order Markov chains

Wonjae Lee and Bongkyoo Yoon

Asian Economic Journal, 2025, vol. 39, issue 3, 365-393

Abstract: This study examines household income mobility in South Korea during two distinct periods (2011–2014 and 2014–2017), employing a second‐order Markov chain model that incorporates novel analytical approaches, including Markovity tests, Class Mobility Delta (CMD), and phase‐type distribution analyses. We find that income transitions depend significantly on income classes of the preceding 2 years rather than just 1 year. Our CMD analysis shows that income classes exhibited statistically significant divergence during 2014–2017, characterized by bipolarization with expansion at both the top (Q7) and contraction in the middle (Q4). Furthermore, phase‐type analyses reveal statistically significant reductions in the expected absorbing time for lower‐income groups transitioning to middle and upper classes, suggesting enhanced upward mobility during 2014–2017. These results underscore the importance of long‐term policy approaches that address deeper structural dynamics influencing household income mobility.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:bla:asiaec:v:39:y:2025:i:3:p:365-393

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