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A New Bismarckian Regime? Path Dependence and Possible Regime Shifts in Korea’s Evolving Pension System

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  • Martin Hering

Abstract

This paper sheds light on the current state and the likely future development of Korea’s evolving pension system by analyzing it from a comparative perspective. It shows that, because of its many institutional layers, the Korean pension system could evolve into one of several different types of pension regimes: if the National Pension Scheme (NPS) were to continue to be dominant and occupational pensions continued to be marginal, a classic Bismarckian system would emerge; if the NPS were to be significantly reduced and occupational pensions were to be significantly expanded, a Bismarckian-light system would be the outcome; if other changes were to occur—such as the conversion of the basic pension into a universal, poverty-preventing pension and the partial replacement of the NPS by a mandatory personal or occupational-pension scheme—a mixed regime would emerge. The paper argues that the emergence and consolidation of a Bismarckian-style, single-pillar system is more likely than the shift to one of the variants of the multi-pillar system, such as the Bismarckian-light and the mixed regime type. Since there are many sources of path dependence that reinforce the Bismarckian path of development, a shift to a different pension regime is very difficult. For example, large accumulated entitlements and the strong redistributive role of the NPS make it difficult to reduce the public, earnings-related pension program, and significant accumulated entitlements and the important role of the severance pay scheme in company financing also make it difficult to expand occupational pensions.

Suggested Citation

  • Martin Hering, 2009. "A New Bismarckian Regime? Path Dependence and Possible Regime Shifts in Korea’s Evolving Pension System," Social and Economic Dimensions of an Aging Population Research Papers 262, McMaster University.
  • Handle: RePEc:mcm:sedapp:262
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    File URL: http://socserv.mcmaster.ca/sedap/p/sedap262.pdf
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    References listed on IDEAS

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    1. Yeon Myung Kim & Kyo-seong Kim, 2005. "Pension Reform in Korea: Conflict between Social Solidarity and Long-term Financial Sustainability," Chapters,in: Ageing and Pension Reform Around the World, chapter 10 Edward Elgar Publishing.
    2. Peter Whiteford & Edward Whitehouse, 2006. "Pension Challenges and Pension Reforms in Oecd Countries," Oxford Review of Economic Policy, Oxford University Press, vol. 22(1), pages 78-94, Spring.
    3. Holzmann, Robert & Palacios, Robert & Zviniene, Asta, 2004. "Implicit pension debt: issues, measurement and scope in international perspective," Social Protection and Labor Policy and Technical Notes 30153, The World Bank.
    4. Ito Peng & Joseph Wong, 2008. "Institutions and Institutional Purpose: Continuity and Change in East Asian Social Policy," Politics & Society, , vol. 36(1), pages 61-88, March.
    5. Ebbinghaus, Bernhard, 2008. "Reforming Early Retirement in Europe, Japan and the USA," OUP Catalogue, Oxford University Press, number 9780199553396.
    6. Joakim Palme & Walter Korpi, 1998. "The Paradox of Redistribution and Strategies of Equality: Welfare State Institutions, Inequality and Poverty in the Western Countries," LIS Working papers 174, LIS Cross-National Data Center in Luxembourg.
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    More about this item

    Keywords

    welfare state; pension systems; path dependence; institutional change; Korea;

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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