KDI Journal of Economic Policy

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P-ISSN 2586-2995
E-ISSN 2586-4130

Vol.48, No.1

Cite

KDI Journal of Economic Policy. Vol. 48, No. 1, February 2026, pp. 5-31

https://doi.org/10.23895/kdijep.2026.48.1.5

× KDI Open Access is a program of fully open access journals to facilitate the widest possible dissemination of high-quality research. All research articles published in KDI JEP are immediately, permanently and freely available online for everyone to read, download and share in terms of the Creative Commons Attribution 4.0 International License.

Addressing the Demographic Decline in South Korea

DANIEL CARROLL; SEWON (Corresponding Author) HUR; SELAHATTIN IMROHOROGLU; BRADEN STRACKMAN

Author & Article History

Manuscript received 05 June 2025; revision received 12 June 2025; accepted 02 October 2025.

Abstract

In this paper, we use an overlapping-generations standard-incomplete markets model to quantitatively investigate the long-run implications of Korea’s demographic changes and policy reforms. Importantly, our quantitative model endogenizes the retirement decision and matches the elasticity of retirement to wealth. We use the model calibrated to Korea’s economy and demography as a quantitative laboratory to investigate two policy scenarios: increasing taxes or decreasing benefits. While decreasing benefits leads to greater long run activity, it comes at the cost of lower average welfare, particularly for retirees.

Keywords

Aging, Social Security Reform, Endogenous Retirement, Fiscal Sustainability

JEL Code

H55, J11, J26, E62

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