A New Bismarckian Regime? Path Dependence and Possible Regime Shifts in Korea’s Evolving Pension System

Martin Hering

Social and Economic Dimensions of an Aging Population Research Papers from McMaster University

Abstract: This paper sheds light on the current state and the likely future development of Korea’s evolving pension system by analyzing it from a comparative perspective. It shows that, because of its many institutional layers, the Korean pension system could evolve into one of several different types of pension regimes: if the National Pension Scheme (NPS) were to continue to be dominant and occupational pensions continued to be marginal, a classic Bismarckian system would emerge; if the NPS were to be significantly reduced and occupational pensions were to be significantly expanded, a Bismarckian-light system would be the outcome; if other changes were to occur—such as the conversion of the basic pension into a universal, poverty-preventing pension and the partial replacement of the NPS by a mandatory personal or occupational-pension scheme—a mixed regime would emerge. The paper argues that the emergence and consolidation of a Bismarckian-style, single-pillar system is more likely than the shift to one of the variants of the multi-pillar system, such as the Bismarckian-light and the mixed regime type. Since there are many sources of path dependence that reinforce the Bismarckian path of development, a shift to a different pension regime is very difficult. For example, large accumulated entitlements and the strong redistributive role of the NPS make it difficult to reduce the public, earnings-related pension program, and significant accumulated entitlements and the important role of the severance pay scheme in company financing also make it difficult to expand occupational pensions.

Keywords: welfare state; pension systems; path dependence; institutional change; Korea (search for similar items in EconPapers)
JEL-codes: D02 H53 H55 J32 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2009-11
New Economics Papers: this item is included in nep-age
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Persistent link: https://EconPapers.repec.org/RePEc:mcm:sedapp:262

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