Working Paper: NBER ID: w12265
Authors: Young Jun Chun
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.
Keywords: No keywords provided
JEL Codes: H3; H60; E21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| population aging (J11) | national savings rate (D14) |
| increasing old-age dependency ratios (J14) | consumption relative to income (E21) |
| consumption relative to income (E21) | national savings rate (D14) |
| fiscal policies (H30) | national savings rate (D14) |
| rising government expenditures on pensions and healthcare (H51) | fiscal burden on future generations (H60) |
| annuitization of wealth from maturing public pensions (H55) | national savings rate (D14) |
| introduction of reverse annuity mortgages (G51) | national savings rate (D14) |