Social security expenditure in Korea is of enormous significance to our future and next generation. However, there has been little research into the socioeconomic effect of social security finance. As part of the effort to make improvement suggestions for Korea's social security system, we analyzed the socioeconomic effect of social security finance and investigated the microeconomic behavior of households. Our study is conducted jointly by the Korea Institute for Health and Social Affairs (KIHASA) and RAND Corporation. In its part, KIHASA constructed and used macro/micro SAM(Social Account Matrix) and a macroeconometric model, while RAND examined the microeconomic effect of the National Pension on household behaviors concerning savings, work, and retirement decisions.
Our empirical analysis shows that basic pension and national health care expenditure, despite their redistributive effect on the elderly population, have a negative effect on economic growth. Also, the analysis based on a dynamic behavioral model indicated preferences towards work and consumption.
From these results, we drew several policy implications. First,the enormous increase in old-age and health expenditure may to some extent stymie economic growth. Second, risk aversion is similar to estimates from other developed countries. Third, women’s work decisions tend to be more responsive to earnings than men’s. Fourth, both women and men tend to have a lower level of willingness to work as they age. Lastly, Korean men tend to have a higher level of willingness to work when their spouses work.
