Economic shocks, accompanied usually by abrupt cyclical fluctuations, tend to degrade people’s living standards and conditions within a short period of time, and thus escalate the need for increased government intervention. A case in point for Korea can be illustrated by how the two past economic crises―one having transpired in 1997 and the other in 2008―augmented the role of government in response to major economic difficulties. The more recent of these two economic crises, coming about as it did on a global scale and having plunged many of the developed European countries all at once into economic distress, provides a context for comparison of social spending in different parts of the world in times of economic recession.
This study gauges the effect that social expenditures as automatic stabilizers have brought about in cushioning the impact of the global financial crisis, especially on income distribution. To understand how social expenditures functioned as automatic stabilizers requires time series data covering periods before, during, and after financial crisis. Most previous studies, however, have little taken into account the period during which the crisis was unfolding. Nor have changes in income distribution measures over this period been sufficiently discussed for different types of welfare states, due to the dearth of internationally comparable data. This study identifies the effect income redistribution had on poverty rates and the Gini coefficient, especially during the period 2008~2010. How public social expenditures functioned as automatic stabilizers is examined in terms of the social spending-GDP relationship derived from a chain equation of national income accounting.