The table below presents key indicators of economic growth and public finance in Korea from the early stages of industrialization to the present. It illustrates that as the economy expanded and living standards improved, the size of government relative to the economy also increased steadily.
Government expenditure as a share of GDP rose from 17.2% in 1960 to 35.3% in 2024, more than doubling over the course of six decades. Over the same period, Korea’s tax burden—the ratio of tax revenue to GDP and the primary source of government finance—increased from 11.8% in 1960 to 18.8% in 2020. In recent years, however, the tax burden has declined slightly, reflecting slower economic growth and weaker tax revenues.
Meanwhile, when social security contributions are added to tax revenue, the overall burden rose steadily after the Asian Financial Crisis as Korea expanded its social insurance and welfare systems. This measure reached 26.2% of GDP in 2020 before declining somewhat in recent years.
Of course, the fact that government spending expanded during a particular period does not, by itself, prove that larger government contributed positively to economic growth. Nevertheless, when economic output and the size of government increase together over several decades—as in Korea’s case—it is reasonable to infer that public finance played, on average, a supportive role in the country’s development. Had government activities consistently hindered growth, it would have been difficult for the public sector’s share of the economy to expand so persistently over such a long period.
The table below presents key indicators of economic growth and public finance in Korea from the early stages of industrialization to the present. It illustrates that as the economy expanded and living standards improved, the size of government relative to the economy also increased steadily.
Government expenditure as a share of GDP rose from 17.2% in 1960 to 35.3% in 2024, more than doubling over the course of six decades. Over the same period, Korea’s tax burden—the ratio of tax revenue to GDP and the primary source of government finance—increased from 11.8% in 1960 to 18.8% in 2020. In recent years, however, the tax burden has declined slightly, reflecting slower economic growth and weaker tax revenues.
Meanwhile, when social security contributions are added to tax revenue, the overall burden rose steadily after the Asian Financial Crisis as Korea expanded its social insurance and welfare systems. This measure reached 26.2% of GDP in 2020 before declining somewhat in recent years.
Of course, the fact that government spending expanded during a particular period does not, by itself, prove that larger government contributed positively to economic growth. Nevertheless, when economic output and the size of government increase together over several decades—as in Korea’s case—it is reasonable to infer that public finance played, on average, a supportive role in the country’s development. Had government activities consistently hindered growth, it would have been difficult for the public sector’s share of the economy to expand so persistently over such a long period.