• KDI Journal of Economic Policy
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• v.33 no.3
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• pp.57-85
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• 2011

This paper investigates the effects of changes in household structure on service demand. The structure of households in Korea has been quickly changed due to low birth rate and population aging as well as increasing women's participation in the workforce. Their consumption patterns may have been altered by the structural changes. This paper focuses on the additional demand for market services replacing household activities such as household chores and care services. First, using a 3-sector time allocation model, we theoretically analyze the mechanism that marketization of household production can lead to the expansion of service industries. Next, in order to analyze the effects of changes in household structure on consumption demand, we estimate the Engel curves according to the QUAIDS model. For empirical work, the Survey of Household Finances was used. According to the results, structural changes in Korean households, such as an increase in single-person households, a decrease in families with a spouse or children under 6 years old, and an increase in dual-earner households, have caused an increase in medical expenses, education and training costs, and expenses for household services, which are typically substitutes for household production services.