Welfare Implications of an Aging Population In Korea

Kiseok Hong
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Kiseok Hong: Ewha Womans University

Korean Economic Review, 2007, vol. 23, 379-414

Abstract: This paper examines macroeconomic impacts of population aging in Korea using a computable general equilibrium (CGE) model of Auerbach-Kotlikoff (AK) type. The conventional AK model is extended in order to incorporate open economy features and endogenous fertility choices. By applying this model to the current demographic structure of Korea, we obtain the following results. First, welfare implications of population aging are rather complicated, since there are both winners and losers. While current and future young generations will be harmed by population aging, current elderly generations benefit from the trend. Second, policy responses to population aging should be considered with great caution. Fertility promoting policies, for instance, may entail substantial redistribution of resources among individuals from current and future generations. Third, opening up the domestic capital market may be less controversial but a more effective policy response. By reducing fluctuations in the interest and wage rates caused by population aging, capital market integration can moderate welfare variations among different generations.

Keywords: Population-Aging; Auerbach-Kotlikoff; Fertility-Choice; Welfare; Capital- Market-Integration (search for similar items in EconPapers)
JEL-codes: C60 E60 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (1)

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