Identifying income heterogeneity determinants using the method of moments quantile regression

Abstract

Prior studies have typically concentrated on poverty status to determine anti-poverty measures; however, this approach cannot sufficiently detect income heterogeneity. This study employs quantile regression for panel data to investigate the Korean Labour and Income Panel Study 2003–2020. Moreover, it adopts both household- and community-level variables and separates demographic groups as working-age and older adults, considering Korea's severe old-age poverty. The findings indicate that household-level characteristics, such as householder's gender, physical health, and employment status, present heterogeneous effects across the income distribution. Second, low-income households are more vulnerable to regional economic and labour market downturns than high-income neighbours. Lastly, although the National Pension, a backbone of the public pension system, provides limited supports for retirees because it was introduced much later than other countries, it assists low-income old adults more effectively. Therefore, this study suggests more tailored redistribution measures, considering heterogeneous effects of household- and community-level environments, and a further expansion of the National Pension to mitigate old-age poverty.