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

Listed author(s):
  • Martin Hering

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.

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Paper provided by McMaster University in its series Social and Economic Dimensions of an Aging Population Research Papers with number 262.

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Length: 58 pages
Date of creation: Nov 2009
Handle: RePEc:mcm:sedapp:262
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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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