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<p>This study investigates the impact of significant basic pension increases in 2019 and 2021 on the labor supply and private transfers of the elderly in South Korea, utilizing the Korean Longitudinal Study of Aging (KLOSA) panel data (2017–2022). To address reciprocal causation and identify causal magnitudes, we employ a panel Structural Equation Modeling (SEM) and a difference-in-differences SEM framework (SEM-DID), supplemented by a Callaway and Sant’Anna (2021) CSDID robustness check. The empirical results reveal a clear divergence in policy outcomes: while the pension expansion did not significantly alter the labor supply of older adults along either the intensive or extensive margins, it exerted a robust crowding-out effect on private transfers, with a 1% increase in benefits leading to an approximately 0.16% reduction in familial support. Subgroup analysis shows that this crowding-out effect is particularly pronounced among higher-income couple households, where private transfers function as discretionary support, whereas lower-income households exhibit less sensitivity due to the subsistence nature of familial aid. The absence of a significant labor supply response reflects the necessity-driven nature of the Korean elderly labor market, where a substantial “neutralizing effect” from reduced private transfers and high poverty rates compel continued market engagement regardless of modest pension increments. These findings suggest that public pensions partially substitute for traditional family-based support, redistributing the economic burden from individual families to the state without distorting labor behavior. This study provides critical insights for the design of sustainable social security systems in rapidly aging societies.</p>

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Basic pension increases and elderly economic behavior in South Korea

  • 期刊论文

  • 发表日期：

    2026年8月3日

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  • Seung Jun Park,
  • Da Hoon Lee

摘要

This study investigates the impact of significant basic pension increases in 2019 and 2021 on the labor supply and private transfers of the elderly in South Korea, utilizing the Korean Longitudinal Study of Aging (KLOSA) panel data (2017–2022). To address reciprocal causation and identify causal magnitudes, we employ a panel Structural Equation Modeling (SEM) and a difference-in-differences SEM framework (SEM-DID), supplemented by a Callaway and Sant’Anna (2021) CSDID robustness check. The empirical results reveal a clear divergence in policy outcomes: while the pension expansion did not significantly alter the labor supply of older adults along either the intensive or extensive margins, it exerted a robust crowding-out effect on private transfers, with a 1% increase in benefits leading to an approximately 0.16% reduction in familial support. Subgroup analysis shows that this crowding-out effect is particularly pronounced among higher-income couple households, where private transfers function as discretionary support, whereas lower-income households exhibit less sensitivity due to the subsistence nature of familial aid. The absence of a significant labor supply response reflects the necessity-driven nature of the Korean elderly labor market, where a substantial “neutralizing effect” from reduced private transfers and high poverty rates compel continued market engagement regardless of modest pension increments. These findings suggest that public pensions partially substitute for traditional family-based support, redistributing the economic burden from individual families to the state without distorting labor behavior. This study provides critical insights for the design of sustainable social security systems in rapidly aging societies.