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The effects of population aging on South Korea’s economy: The National Transfer Accounts approach

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  • Kim, Hyun Kyung
  • Lee, Sang-Hyop

Abstract

This study examines how two factors of population aging, changes in fertility and mortality, will respectively affect South Korea’s economic future. The economic effects of population aging are examined by considering the population in each age group under alternative demographic scenarios. Utilizing recent population projections and South Korea’s National Transfer Accounts, the paper applies a simple decomposition model measuring the respective effects of fertility and mortality on separate aspects of the economy: labor income, private and public consumption, and public and private transfers. The results show that the effects of low fertility and low mortality on the economy are very different in direction, magnitude, timing, and impact by age group. The only effect of an aging population that is the same in all circumstances is the effect on the public pension system: low fertility and mortality will increase pressure on the public pension system of South Korea.

Suggested Citation

  • Kim, Hyun Kyung & Lee, Sang-Hyop, 2021. "The effects of population aging on South Korea’s economy: The National Transfer Accounts approach," The Journal of the Economics of Ageing, Elsevier, vol. 20(C).
    • Handle: RePEc:eee:joecag:v:20:y:2021:i:c:s2212828x21000335
    DOI: 10.1016/j.jeoa.2021.100340
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    References listed on IDEAS

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    1. Sang-Hyop Lee & Andrew Mason, 2012. "The economic lifecycle and support systems in Asia," Chapters, in: Donghyun Park & Sang-Hyop Lee & Andrew Mason (ed.), Aging, Economic Growth, and Old-Age Security in Asia, chapter 5, pages 130-160, Edward Elgar Publishing.
    2. Sang-Hyop Lee & Jungsuk Kim & Donghyun Park, 2017. "Demographic Change and Fiscal Sustainability in Asia," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 134(1), pages 287-322, October.
    3. Ronald Lee & Andrew Mason (ed.), 2011. "Population Aging and the Generational Economy," Books, Edward Elgar Publishing, number 13816.
    4. Samuel Preston & Christine Himes & Mitchell Eggers, 1989. "Demographic Conditions Responsible for Population Aging," Demography, Springer;Population Association of America (PAA), vol. 26(4), pages 691-704, November.
    5. Joshua R. Goldstein & Ronald D. Lee, 2014. "How large are the effects of population aging on economic inequality?," Vienna Yearbook of Population Research, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna, vol. 12(1), pages 193-209.
    6. Carter, Lawrence R. & Lee, Ronald D., 1992. "Modeling and forecasting US sex differentials in mortality," International Journal of Forecasting, Elsevier, vol. 8(3), pages 393-411, November.
    7. Ronald D. Lee, 1994. "Population Age Structure, Intergenerational Transfer, and Wealth: A New Approach, with Applications to the United States," Journal of Human Resources, University of Wisconsin Press, vol. 29(4), pages 1027-1063.
    8. Ronald Lee & Andrew Mason, 2011. "Theorectical aspects of National Transfer Accounts," Chapters, in: Ronald Lee & Andrew Mason (ed.), Population Aging and the Generational Economy, chapter 2, Edward Elgar Publishing.
    9. Ronald Lee & Yi Zhou, 2017. "Does Fertility or Mortality Drive Contemporary Population Aging? The Revisionist View Revisited," Population and Development Review, The Population Council, Inc., vol. 43(2), pages 285-301, June.
    10. Donghyun Park & Sang-Hyop Lee & Andrew Mason (ed.), 2012. "Aging, Economic Growth, and Old-Age Security in Asia," Books, Edward Elgar Publishing, number 15088.
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    13. Eleanor Jawon Choi & Jisoo Hwang, 2015. "Child Gender and Parental Inputs: No More Son Preference in Korea?," American Economic Review, American Economic Association, vol. 105(5), pages 638-643, May.
    14. Nan Li & Ronald Lee & Patrick Gerland, 2013. "Extending the Lee-Carter Method to Model the Rotation of Age Patterns of Mortality Decline for Long-Term Projections," Demography, Springer;Population Association of America (PAA), vol. 50(6), pages 2037-2051, December.
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    Cited by:

    1. Ke Zhang & Hao Sun & Xiangyu Li, 2022. "Aging Population Spatial Distribution Discrepancy and Impacting Factor," Sustainability, MDPI, vol. 14(15), pages 1-22, August.

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    More about this item

    Keywords

    Population aging; Low fertility; National Transfer Accounts; South Korea’s aging crisis; Generational economy;
    All these keywords.

    JEL classification:

    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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