Population Aging, Fiscal Policies, and National Saving: Predictions for Korean Economy

37 Pages Posted: 1 Jun 2006 Last revised: 8 Jul 2022

See all articles by Young-Jun Chun

Young-Jun Chun

Incheon National University - Department of Economics

Date Written: May 2006

Abstract

This paper evaluates the effects of population aging and fiscal policies on national saving in Korean situation. For the prediction of the national savings rate of Korea for the next several decades, we employ a life-cycle model, which incorporates the generational accounting approach needed to assess the distribution of fiscal burden across generations. We found that the rapid population aging and long-term budgetary imbalance will substantially lower the national savings rate in Korea. A sensitivity analysis based on an alternative model, an altruistic family model, shows that these predictions are robust to the specification of altruism among generations. In addition, the estimation results of consumption functions with respect to various kinds of wealth suggest that the annuitization of wealth due to maturing of public pensions and introduction of reverse annuity mortgage is likely to further decrease the savings rate in the future.

Suggested Citation

Chun, Young-Jun, Population Aging, Fiscal Policies, and National Saving: Predictions for Korean Economy (May 2006). NBER Working Paper No. w12265, Available at SSRN: https://ssrn.com/abstract=905522

Young-Jun Chun (Contact Author)

Incheon National University - Department of Economics ( email )

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Incheon
Korea