Impact of Aging and Underemployment on Income Disparity between Agricultural and Non-Agricultural Households

Abstract

This paper examines how aging and underemployment affect household income and household income disparity between agricultural and non-agricultural sectors. Our study uses household panel data from South Korea for the period 2009–2016, which include, on average, 6721 representative households each year. A three-step regression analysis was conducted to estimate the aging and underemployment effects on household income and the income disparity between agricultural and non-agricultural households. First, we estimate aging and underemployment effects on household income from all households using a year fixed-effect longitudinal model. Second, our study investigates whether the marginal effect of aging and underemployment on household income differs between agricultural and non-agricultural sectors. Finally, we simulate the estimated model to illustrate how government policies could help reduce the income disparity. Our results show that aging and underemployment affect household income negatively overall. The negative marginal effect of the two factors was greater in the agricultural sector than in the non-agricultural sector. Results from policy simulations suggest that the implementation of proper government policies to address aging and underemployment problems in agricultural households could significantly reduce the income disparity between agricultural and non-agricultural sectors.