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Addressing the Demographic Decline in South Korea

Author

Listed:
  • Carroll, Daniel
  • Hur, Sewon
  • İmrohoroğlu, Selahattin
  • Strackman, Braden

Abstract

In this paper, we use an overlapping-generations standard-incomplete markets model to quantitatively investigate the long-run implications of Korea's demographic changes and policy reforms. Importantly, our quantitative model endogenizes the retirement decision and matches the elasticity of retirement to wealth. We use the model calibrated to Korea's economy and demography as a quantitative laboratory to investigate two policy scenarios: increasing taxes or decreasing benefits. While decreasing benefits leads to greater long run activity, it comes at the cost of lower average welfare, particularly for retirees.

Suggested Citation

  • Carroll, Daniel & Hur, Sewon & İmrohoroğlu, Selahattin & Strackman, Braden, 2026. "Addressing the Demographic Decline in South Korea," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 48(1), pages 5-31.
    • Handle: RePEc:zbw:kdijep:341446
    DOI: 10.23895/KDIJEP.2026.48.1.5
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    Keywords

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    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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