Social Insurance in an Aging Population: Impacts of a Government Transfer Program in South Korea

Abstract

We study the effects of a new social insurance program for the elderly on their private cash transfers from adult children, living arrangements, and labor supply in South Korea. Using nationally representative household survey data, we find robust evidence that the social insurance program reduced private cash transfers from adult children. The estimated crowding-out effects are around -1. However, we find little impacts of the policy on the probabilities of coresidence with adult children or grandchildren and the elderly labor supply measured by employment and working hours. The results imply that social insurance may not effectively reduce poverty among the elderly in Asian countries where private support from adult children to parents is pervasive.