After and before the economy crisis:

Before and After the Economic Crisis:

Changes in Financial Ratios of the Self-employed Households


MiKyeong Bae, KeiMyung University, Eunyoung Baek,
Sungkyunkwan University, and Sherman D. Hanna, Ohio State University


             The purpose of this study is to examine the
changes in financial structure of the self-employed brought by the economic
crisis in Korea..
This study used a 1997 and 1998 Korean Household Panel Study collected by
Daewoo Economic Research Institute. Only the self-employed were included in
this study, resulting in 692 households in 1997 and 600 households in 1998. In
terms of the changes in expenditure to income ratio showed that 57% of the
households met the suggested guideline in 1997 while less than half (45.5%) of
the households met the guideline in 1998; hence, the households that met the expenditure
to income ratio guideline decreased by 11.6% after the economic crisis. This
result suggested that income drop was greater than expenditure cut during these
periods rather than the level of expenditure increased after the crisis.

             The changes in burden of debt between 1997 and 1998 were
measured using liquid asset to total debt ratio and total debt to net worth
ratio. Although households that met liquid asset to total debt ratio decreased
7.3%, households that met total debt to net worth ratio increased by 1% after
the crisis. Due to the increase in real estate in net worth and decrease in
liquid asset, households that met liquid asset to total debt fell while those
that met total debt to net worth rose. In light of importance of the
self-employed households in Korea,
asset structure needs to be analyzed more in detail before setting up economic
policies such as national pension or medical insurance for the self-employed. In
addition, research on changes in portfolio structure of subdivided groups of
the self-employed households would be important.