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Korea is facing mounting economic challenges. Productivity growth has been on a trend decline amid demographic headwinds, while the societal demand for inclusive growth has been on a steep rise. Furthermore, the government-led unbalanced growth model—which served Korea well in the past—has become less effective and politically palatable in recent years. As such, Korea needs a major paradigm shift to embark on a new sustainable and inclusive growth path. But policy response has been modest at best with no major reforms being implemented over the past two decades. We propose a paradigm shift in Korea’s economic framework, involving a simultaneous big push for greater economic freedom and stronger social protection within the parameters set by long-run fiscal sustainability. We also provide a detailed account of structural reforms to boost economic freedom and sustainable funding plans for stronger social protection.

Labor --- Macroeconomics --- National Government Expenditures and Welfare Programs --- Debt --- Debt Management --- Sovereign Debt --- Development Planning and Policy: General --- Innovation --- Research and Development --- Technological Change --- Intellectual Property Rights: General --- Labor Economics: General --- Institutions and the Macroeconomy --- Aggregate Factor Income Distribution --- Education: General --- Demand and Supply of Labor: General --- Labour --- income economics --- Education --- Structural reforms --- Income --- Labor markets --- Macrostructural analysis --- National accounts --- Income inequality --- Labor economics --- Labor market --- Income distribution --- Korea, Republic of