sustainability Article Impact of Aging and Underemployment on Income Disparity between Agricultural and Non-Agricultural Households Joohun Han and Chanjin Chung *   Citation: Han, J.; Chung, C. Impact of Aging and Underemployment on Income Disparity between Agricultural and Non-Agricultural Households. Sustainability 2021, 13, 11737. https://doi.org/10.3390/ su132111737 Academic Editor: José Alberto Molina Received: 24 September 2021 Accepted: 20 October 2021 Published: 24 October 2021 Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affil- iations. Copyright: © 2021 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/). Department of Agricultural Economics, Oklahoma State University, Stillwater, OK 74078, USA; Joohan@okstate.edu * Correspondence: chanjin.chung@okstate.edu Abstract: This paper examines how aging and underemployment affect household income and household income disparity between agricultural and non-agricultural sectors. Our study uses household panel data from South Korea for the period 2009–2016, which include, on average, 6721 representative households each year. A three-step regression analysis was conducted to estimate the aging and underemployment effects on household income and the income disparity between agricultural and non-agricultural households. First, we estimate aging and underemployment effects on household income from all households using a year fixed-effect longitudinal model. Second, our study investigates whether the marginal effect of aging and underemployment on household income differs between agricultural and non-agricultural sectors. Finally, we simulate the estimated model to illustrate how government policies could help reduce the income disparity. Our results show that aging and underemployment affect household income negatively overall. The negative marginal effect of the two factors was greater in the agricultural sector than in the non-agricultural sector. Results from policy simulations suggest that the implementation of proper government policies to address aging and underemployment problems in agricultural households could significantly reduce the income disparity between agricultural and non-agricultural sectors. Keywords: income disparity; agricultural and non-agricultural households; underemployment; aging 1. Introduction The income disparity between agricultural and non-agricultural households has been increasing in many countries. Studies in the labor economics literature often link population aging and underemployment to low labor participation and productivity, fewer savings, and greater financial pressure on households [1]. Population aging in agricultural house- holds becomes more prevalent than in non-agricultural households as better-educated, wealthier, and younger-generation workers tend to shun low-paying manual jobs in agri- culture [2,3]. Underemployment, which was considered an urban-specific issue in the past, is also a serious problem among agricultural households because of surplus labor, particularly in developing countries [4]. Underemployment is the condition where workers’ working hours are less than full-time or positions are inadequate concerning workers’ train- ing or economic needs [5]. Therefore, the term underemployed workers refers to relatively less productive workers. Even in many developed countries, new technology adoption and structural change result in a greater extent of underemployment in the agricultural labor market (e.g., due to the adoption of newly developed farm equipment, farmers need fewer workers to operate their farms; yet all family workers are still classified as employed farm workers) [6]. The underemployed agricultural household members (who are likely less productive family workers) decrease overall household productivity and per capita household income. Many studies in labor economics point out that aging and underemployment are major factors in determining the wage, well-being, and productivity level of workers Sustainability 2021, 13, 11737. https://doi.org/10.3390/su132111737 https://www.mdpi.com/journal/sustainability