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The Effects of the Reduction in Payment of the National Pension on Household Behavior of Private Pension Contribution by Income levels

  • Journal of Insurance and Finance
  • 2011, 22(4), pp.3-31
  • Publisher : Korea Insurance Research Institute
  • Research Area : Social Science > Business Management

김재호 1

1성균관대학교

Accredited

ABSTRACT

According to life-cycle model, households decide consumption and saving given their lifetime income. However, if they live longer than expected lifetime, they face longevity risk as they have to live the rest of their life with scarce income. This study investigates whether rational households will increase the contribution to private pension in response to the reduction in payment of the National Pension in 2007 by income levels. Targeting 50's households in the Korean Retirement and Income Study, this study utilizes Propensity Scoring Matching and Difference in Difference. The empirical results indicate that reduction in payment of the National Pension cause the third income-tier household to decrease the contribution while fourth income-tier household to increase the contribution to private pension in response to the reduction in payment. This result suggests that the contribution to private pension is related with income level, so it is necessary for the government to increase tax benefits and subsidize low income households for private pension to assist National Pension.

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