Retrospective Generational Accounts for Korea

Young Jun Chun and Ji Eun Song
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Young Jun Chun: Hanyang University
Ji Eun Song: National Assembly Futures Institute

Korean Economic Review, 2018, vol. 34, 157-185

Abstract: This study addresses fiscal sustainability and generational equity of Korea by using generational accounting (GA). Unlike previous Korean GA studies, we compute retrospective GA, assessing the value of net taxes paid in the past combining this with traditional forward-looking GA, appraising the rest-of-life net tax burden to obtain full lifetime accounts (FLGA). FLGA cover the entire life for all the cohorts. We find that the fiscal policies of Korea bring about generational inequity. The net tax burden of future generations should be raised to an unbearable level, higher than 40% of lifetime income, to service government spending under the current policies. In addition, we show that parametric reforms to resolve the problem have only limited effects even under the demographic assumptions that subsidy to childbirth and childcare and open-door immigration policy substantially reverse population aging and reduction, which indicates the requirement of many fundamental reforms.

Keywords: Retrospective Generational Accounts; Generational Equity; Fiscal Sustainability (search for similar items in EconPapers)
JEL-codes: H22 H53 H60 (search for similar items in EconPapers)
Date: 2018
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