Poverty Dynamics and the Role of Antipoverty Policy: Panel Evidence from Korea

This study empirically analyzes whether the Korean government’s anti-poverty policy called the National Basic Livelihood Security System (NBLSS) effectively reduces poverty. To improve previous analyses in literature, we take the dynamic transitions of poverty status over years into account and evaluate the program effectiveness by comparing it with an imaginary situation where the NBLSS does not exist. We employed the Korea Welfare Panel Study data set, which collects detailed information on family structure, income, and employment status for poor, working poor, and near poor from 2005 to 2020, covering on average more than 6,000 households. In addition, to overcome the traditional event history model assuming left-censoring—and not considering the multiple status of dependent variables over years—we used multistate modeling, which allows us to model transitions between poverty and non-poverty dynamically with no bias from truncation. Our findings suggest the NBLSS is in general not effective, given that a model with the NBLSS does not make a significant difference in supporting people to get out of poverty from one without the NBLSS. However, it is found that it is quite effective for 1-person families, a family type that already takes up more than a third of all family type in the country. Also, it should be noted that the transition matrix shows that on average the probability of coming out of poverty is more than twice larger than the probability of falling into poverty, which implies a high upward mobility in terms of poverty. Still, the program should be improved by weakening the principle of subsidiarity.