Research Monographs

Development of Social Insurance Policy Experiment Model using Dynamic Programming

Development of Social Insurance Policy Experiment Model using Dynamic Programming

  • Author

    Won, Jongwook

  • Publication Date

    2018

  • Pages

  • Series No.

  • Language

It is the second year work of extending and modifying RAND Corporations’s prototype dynamic behavioral model that was developed in collaboration with KIHASA in 2015-2016. In 2017, for the first attempt to modifying a prototype model, we transformed couple’s decision-making model the male-head of household model to account for male-oriented labor market environment of Korea. We also extended a model by adding public health insurance system to the budget constraint. In 2018, we modeled both male-head of household model and couple’s decision-making model that include public health insurance system in budget constraint. The contribution of this year’s research is in improving reliability of the model in terms of parameter estimation and policy experiment. We tested reliability of parameter estimation by comparing six different model settings that are derived from different assumptions in asset discretization. We noticed that parameter estimations are stable over six different model settings, and concluded that an extension of model produces reliable result. We also improved model fitting in asset by fixing two parameters in bequest, and should be able to interpret effects of different policy shocks. Finally, we could interpret differences in response of representative household to different policy shocks in relation to difference in fourteen parameters that shape preference of household. 

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