Social Policies in an Age of Austerity

Social Policies in an Age of Austerity

A Comparative Analysis of the US and Korea

KDI/EWC series on Economic Policy

Edited by John Karl Scholz, Hyungypo Moon and Sang-Hyup Lee

Social Policies in an Age of Austerity is the first major publication on the topic, with a particular interest in the United States and the Republic of Korea. The authors of the ten chapters in this book review recent developments in social policies in OECD countries, with a focus on achieving greater effectiveness in public spending on social programs, under increasingly tight national budgets. The contributions cover social and fiscal policy and issues in labor market policy, in addition to the effectiveness of social insurance, education and antipoverty policy.

Chapter 10: Korea’s Basic Old-Age Pension and its poverty reduction effects

Wankyo Chung

Subjects: asian studies, asian economics, asian social policy, economics and finance, asian economics, social policy and sociology, comparative social policy, economics of social policy


Wankyo Chung estimates the poverty reduction effect of the Basic Old-Age Pension (BOAP) in Korea. More specifically, he examines the poverty reduction effects of the direct income transfer through the BOAP to the elderly. Chung begins with an overview of the National Pension Scheme (NPS) and the BOAP. The NPS, initiated in 1988, was expanded to universal coverage in 1999. But by 2009 only about 28 percent of the elderly were recipients, because it had been introduced recently. Due to the low coverage, an additional pension scheme, the BOAP was introduced in January 2008. The purpose of the BOAP is to help to alleviate poverty among the elderly, but the amount of the benefit is small: only 5 percent of the three-year average earnings of everyone insured by the NPS. The author conducts statistical analysis to examine absolute poverty, using the minimum cost of living as the poverty line. Both the poverty rate and the poverty gap index are used to estimate the poverty reduction effect on the elderly resulting from the newly introduced BOAP.

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