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Effects of the basic pension reform on consumption and labor supply of the elderly

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  • Cho, Minsoo
  • Son, Hyelim

Abstract

This study examines the effects of South Korea's Basic Pension reform on the consumption and labor supply of the elderly. Using data from the Korea Welfare Panel Study (KoWePS) spanning the years 2009 to 2018, and by applying the difference-in-differences methodology, we find that the increase in pension benefits has had a small positive effect on household consumption but no significant impact on overall employment. However, we observe a decline in full-time employment and total work hours among the elderly. Additionally, a triple-difference analysis shows that the labor supply reduction is concentrated among low-educated elderly women, highlighting important heterogeneity in policy responses to the pension reform.

Suggested Citation

  • Cho, Minsoo & Son, Hyelim, 2026. "Effects of the basic pension reform on consumption and labor supply of the elderly," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 48(3), pages 25-49.
    • Handle: RePEc:zbw:kdijep:344135
    DOI: 10.23895/KDIJEP.2026.48.3.25
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    Keywords

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    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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