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					                          Child-to-Parent Financial Transfers and
                   Their Contribution to Reducing Elder Poverty in Korea




                                            June 2009



                                       Hye-Won Erin Kim
                                        Duke University
                                        hk31@duke.edu


                                        Philip J. Cook
                                   Duke University and NBER
                                       pcook@duke.edu



Abstract:

The population of South Korea is ageing rapidly and the threat to elderly well-being from the
erosion of traditional family care is of much concern. Yet relatively little is known about the
actual financial status of elderly Koreans or the amount of support elderly Koreans receive from
their children. This paper addresses these issues using data from the first wave of the Korean
Longitudinal Study of Ageing. We find that almost 70 percent of elderly Koreans received
financial transfers from children and the transfers accounted for about a quarter of an average
elderly individual’s income. We estimate that over 60 percent of Koreans aged 65+ would be
poor without private transfers most of which are from children. Elderly poverty is still mitigated
substantially both by cohabitation with children and by transfers from children. Furthermore,
income inequality among the elderly is reduced on balance by transfers from children.



* This paper is prepared for the Seminar on Family Support Networks and Population Aging
sponsored by the United Nations Population Fund (UNFPA) and the Doha International Institute
for Family Studies and Development held in Doha, Qatar on June 3-4, 2009.
I. INTRODUCTION


         The Korean population is rapidly ageing due to extended life expectancy and decreased
fertility rates. One result is a growing need for elder care and financial support. But the
traditional arrangement of family provision, especially the dominant role of the first son as the
primary source of support for aged parents, is breaking down, and an alternative system is not yet
in place. As a result, caring for the rapidly increasing ranks of older Koreans poses a major
challenge to Korean society and the Korean government in particular.
         Despite the sense of an impending crisis faced by elderly Koreans, there is relatively little
systematic knowledge concerning their financial well-being. During this transitional period, it is
also important to understand the current role of children in providing elder support. Accordingly,
this study utilizes data from a national survey to provide an overview of children’s financial
transfers to their parents and assess the extent to which the support contributes to reducing
poverty among elderly Koreans.
         This paper is organized in the following way. Section II provides background on elder
care in Korea and Section III summarizes the relevant literature on intergenerational transfers in
Korea. Section IV introduces the Korean Longitudinal Study of Ageing dataset and variables.
Section V summarizes child-to-parent financial transfers, estimates poverty among older
Koreans, and examines children’s contribution to reducing the poverty. Finally, section VI
concludes this paper.



II. BACKGROUND ON KOREAN ELDER CARE SYSTEM


         The Korean population is rapidly ageing due to growing life expectancy and decreased
fertility rates (Table 1). Though population ageing is common in many developed countries, it is
occurring much faster in Korea, giving little time for the Korean government to cope. The
transition from an ageing society, where over 7 percent of the population are aged 65 or older, to
an aged society, where over 14 percent are aged 65 or older, is expected to take roughly 19 years
from 2000 to 2018. This transition is notably shorter than the estimates of 115 years in France,
71 years in the U.S., and 24 years in Japan (Korea National Statistical Office, 2006; United
Nations, 1996). The growth rate of the oldest of the old is even higher, which will engender a
drastic increase in chronic illnesses and elder care needs.
         Traditionally, families have played the dominant role in the Korean elder care system. In
particular, based on the prevailing Confucianism in East Asian countries, the eldest son has been
primarily responsible for taking care of his old parents, co-residing with them in a three
generation household. Since males have been the usual breadwinner in Korea, the wife of the
eldest son has been the actual care provider for her parents-in-law.
         Although caring for an old parent has often been honored as a reflection of filial piety in
Korea, the relationship has traditionally included an intergenerational exchange of resources,
reinforced by strong norms. In a largely agrarian society, the eldest son took advantage of scarce
family resources such as educational opportunities and family properties (Oh and Warnes, 2001).
In return, the eldest son and his wife cared for his parents when they got old. The eldest son who



                                                  1
neglected his parents could be easily identified in a rural society with limited mobility and was
strongly blamed for neglecting his filial duty by his siblings and neighbors.
        Although adult children are still an important source of old age security for parents, the
tradition of family care is rapidly breaking down. For example, the proportion of elderly people
who lived with their child decreased from 77 percent in 1984 to 54 percent in 1998 (Kim and
Rhee, 1999). Child-to-parent monetary transfers accounted for 72 percent of total parental
income in 1980 but only 31 percent of the income in 2003 (Moon et al., 2006).
        Fast industrialization and urbanization of the Korean society during recent decades
contributed to the erosion of the parent-child bond. Many people have moved away from their
home towns and found jobs outside of the agricultural sector, so the importance of family
properties has decreased. Expansion of secondary and higher education also made children less
dependent on parental transfers. As more women participate in the labor market, fewer of them
become available for elder care (Choi, 2001). In urban areas, residences tend to be cramped and
hence less suited for living with elderly parents (Choi, 1999) and increased mobility makes it
easier for neglectful children to avoid community stigma.
        Although the traditional family care system is breaking down, an alternative public
system is either not yet in place or at the infant stage. The Korean national pension program
started in 1988, so few elderly people have accumulated enough funds to receive sizable benefits.
Two major programs for old age security, the Basic Old-Age Pension and the Long-term Care
Insurance, only started in 2008. As for elder care services, Cho et al. (2004) estimated that the
ratio of the number of long-term care beds to number of the elderly in Korea, 0.4 percent, is
much lower than that of developed countries, where it ranges from 2 to 7 percent.
        In fact, with its priority on economic growth, the Korean government has tended to
minimize its provision of social services. Elder care has been no exception and the government
has intentionally emphasized the norm of filial piety (Chee, 2000; Palley, 1992). Expenditures
for the welfare of the elderly population took only about 0.4 percent of the total government
budget and about five percent of the Korean Ministry of Health and Welfare budget until recent
years (Figure 1). However, with the two policies introduced in 2008, the expenditures in the
year recorded a dramatic increase by 262 percent compared to that in 2007, reaching 2.1 billion
k (Korean Ministry of Health and Welfare, 2008).1



III. CURRENT KNOWLEDGE AND NEXT STEPS


        Despite this sense of urgency, the financial well-being of older Koreans has not been
much studied. As the family care tradition is rapidly collapsing down, there is also a need to
better understand the current role of children as a provider of economic support for their elderly
parents. This understanding can also be a starting point to estimate the extent to which the
Korean government’s efforts to provide financial old-age security, such as the expansion of the
Korean national pension program and the introduction of the Basic Old-Age Pension, crowd out
financial elder support provided by children. Our paper fills these gaps in the literature.
        In the past, researchers paid little attention to the elderly population partly due to a lack
1
  1,000 Korean won is worth about $1. For that reason the financial statistics in this paper are presented
in units of 1,000 Korean won, abbreviated k .


                                                     2
of data. With raised concerns on population ageing, new surveys targeting elderly Koreans were
initiated and recent studies using the datasets started to provide more accurate estimates of the
financial status of older Koreans. For example, using the 2003 wave of the Korea Labor and
Income Panel Study, Moon et al. (2006) analyzed poverty among households headed by people
aged 60 or older. By comparing their household income net of private transfers, which are
mostly transfers from children, and the poverty line announced by the Korean Ministry of Health
and Welfare, the study estimated 38.7 percent of the households were poor with a poverty gap of
4.5 billion k . Adding private transfers to the household income decreased the proportion to
27.9 percent and the gap to 2.8 billion k .
         In another study, the Korea Institute for Health and Social Affairs conducted surveys in
1994, 1998, and 2004 in order to ascertain the overall well-being of elderly people (Chung et al.,
2005). The 2004 study summarizes income of 3,278 Koreans aged 65 or older by sources.
According to the results, 92.6 percent had public transfers, 78.6 percent had private transfers,
27.8 percent had earned income, and 12.5 percent had pension or other financial income.2 For
those who had income from each source only, mean annual income was 7,320 k of pension or
other financial income, 6,720 k of earned income, 2,110 k of private transfers, and 1,420 k
of public transfers.
         The Korean Retirement and Income Study (KREIS), which is a nationally representative
survey of households with at least one household member aged 50 or above, is unusual in that it
surveys intergenerational transfers not only between non-coresident but also between coresident
family members. Kim (2008, a) analyzed 4,800 households in the first wave of the KREIS and
found 16.5 percent and 45.8 percent of respondents received financial transfers from coresident
and non-coresident children in 2004, respectively. For children that made a transfer, the median
transfer was 2,000 k from the former and 1,500 k from the latter. As for the composition of
incomes, 50.8 percent came from earned income, 16.0 percent from asset income, 5.1 percent
from pension income, 1.7 percent from public transfers, and 16.3 percent from private transfers.
         In an older study, Seok and Kim (2000) analyzed Koreans aged 65 or older in the 1996
National Survey of Household Income and Expenditure. Using the same definition of poverty in
Moon et al. (2006), the authors found 54.1 percent of elderly people who lived separately from
all their children were poor while only 8.3 percent of elderly people who were coresident with a
child were poor. When private transfers were included, the proportion of poor elderly people
decreased to 31.0 percent and 4.6 percent in non-coresident and coresident groups, respectively.
         Thus there is a growing literature on the financial well-being of elderly Koreans and
children’s contribution to the well-being, but there still exists a paucity of evidence. The 2005
wave of the Korean Longitudinal Study of Ageing (KLOSA) is one of the few large datasets with
recent detailed information on intergenerational transfers between elderly people and their
children. Though some studies analyzed the data to estimate the determinants of child-to-parent
financial transfers (Kim 2008, b; Park 2008), no study has examined the dataset in terms of the
role of the transfers in reducing poverty among older Koreans. Therefore, utilizing the dataset,
we provide an overview of child-to-parent financial transfers in Korea, estimate poverty among
older Koreans, and add evidence on children’s contribution to reducing the poverty through
financial transfers in addition to cohabitation.


2
 The high proportion of recipients of public transfers is due to public transportation subsidies, for which
all elderly Koreans are eligible for.


                                                     3
IV. DATA AND VARIABLES


         This paper analyzes the first wave of the Korean Longitudinal Study of Ageing
(KLOSA), which was sponsored by the Korean Ministry of Labor and conducted by the Korea
Labor Institute. The study sample is representative of Koreans aged 45 or older excluding
institutionalized people and residents of Che-Ju Island (Korea Labor Institute, 2007). For the
purpose of this study, the analysis sample is limited to people aged 65 or older (hereafter elderly
people). Age 65 is not only the usual cutoff point to define the aged population in various
demographic studies, but also an eligibility criterion for Korean government programs targeted
on older people. The final analysis sample includes 3,981 elderly people.3
         The KLOSA is a longitudinal survey. The first wave, which contains data for 2005, has
been released and follow-up waves are planned every other year. Data collection for the 2007
wave is completed and expected to be available in late 2009. In the KLOSA, data were gathered
through the technique of Computer Assisted Personal Interviewing. The response rate for the
entire sample is 70.7 percent at the household level and 89.2 percent at the individual level and
these rates are comparable to panel studies designed for middle-aged and elder population in
other countries.
         In terms of sampling design, the KLOSA used the sampling frame of the Korean Census
of Population and Housing. The frame was stratified by three criteria–15 localities (Seoul, six
metropolitan cities, and eight provinces), urban/rural areas, and apartments/general houses.
After each locality being assigned 15 enumeration districts, an additional 775 enumeration
districts were assigned to each locality proportionally to its size. 15 households were randomly
sampled from each enumeration district in Seoul, 13 from enumeration districts in metropolitan
cities and Kyung-Gi province, and 12 from enumeration districts in other provinces. If a
household includes a person aged 45 or older, all household members falling into the age range
were asked to participate in the survey.
         The KLOSA dataset consists of comprehensive ageing-related modules including socio-
demographic characteristics, income, assets, family composition, health, employment, and life
satisfaction. In particular, it has detailed information about income, including transfers among
family members, and assets. In fact, the KLOSA is one of few large studies which include
financial information on elderly persons. Table 2 presents summary statistics of key variables in
the KLOSA.
         To see what poor elderly people look like, we also compare the characteristics of elderly
Koreans based on their poverty status. In this paper, poverty is defined utilizing the eligibility
criterion for the Basic Old-Age Pension, which provides poor elderly people with supplemental
income just as does the Supplemental Security Income program in the U.S. By this criterion, an
elderly person is classified as being poor if his or her self-support, annual income except private
transfers + 0.05*net assets, is lower than a predetermined poverty line, equivalent to $3,840 for
married individuals and $4,800 for others (Korean Ministry of Health and Welfare, 2007).
According to the criterion, over 60 percent of elderly Koreans were poor in 2005. Elder poverty
will be analyzed in more detail in later sections.
         When compared by poverty status, poor elderly people were more likely to be old,
female, and widowed or dispersed, that is, having a spouse in North Korea and less likely to be
3
 This study excludes about six percent of elderly people who were married but whose spouse did not
participate in the survey.


                                                  4
educated, married, and employed (Table 2). Elderly people in poverty had more grandchildren,
though a similar number of children, and spent more time taking care of grandchildren. Poor
elderly people had more ADL and IADL limitations and reported worse subjective health.



V. ELDER POVERTY AND ROLE OF CHILDREN


        In this section, we summarize children’s financial transfers to their elderly parent,
estimate poverty in the elderly population, and assess the extent to which child-to-parent
financial transfers contribute to reducing the poverty in Korea in 2005. In the KLOSA,
respondents reported the amount of their income and assets by detailed source.4 One reported
source of the income is financial transfers from children, which provides the empirical basis for
examining financial support by children for their aged parents.5 One limitation of the dataset is
the transfers between parents and children were surveyed only for parent-child pairs who did not
live together. Thus any transfers between cohabiting children and their parents are missing from
our tabulations.


Child-to-Parent Financial Transfers

         Respondents in the KLOSA reported whether they received any financial transfers from
each of their non-coresident children in 2005 and, if so, how much. Regular and irregular
financial transfers and in-kind transfers were surveyed separately and this paper analyzes the
sum of the financial transfers. First, we summarize child-to-parent financial transfers in the
entire elderly population. As reported in Table 3, 68.1 percent of elderly Koreans received a
positive financial transfer from children and the median amount was 400 k . When the sample
is restricted to elderly people who received positive transfers only, the median value increased to
800 k .
         We also compared child-to-parent transfers by elderly people’s poverty status and living
arrangements, which are classified into “living separately from all children and unmarried”,
“living separately from all children and married”, “coresident with a child and unmarried”, and
“coresident with a child and married.” The results show elderly people who lived separately

4
  In the KLOSA, respondents were asked to report their own income excluding their spouse’s income and
assets under their own name. While elderly males tend to earn more than elderly females and assets are
also more likely to be registered under husband’s name, living standard of an elderly couple depends on a
couple’s entire income and assets. Accordingly, for an elderly couple, this paper recalculated personal
income and assets by averageing husband’s and wife’s income and assets.
5
  For all questions regarding children, including those on financial transfers between parents and children,
only one person within a couple answered to the questions and the answer was applied to both the
husband and the wife. However, compared to transfer data from other studies, married/cohabited
respondents do not seem to separate what they received from or gave to children from what their spouse
did. Accordingly, we assume people reported transfers at a couple-level and divide the transfers by two if
an elderly person was married. When transfer amount in the dataset is not the same for a husband and his
wife, averaged amount is used.


                                                     5
from all children were more likely to receive financial transfers from their children and received
a greater amount of transfers compared to elderly people living with a child (Figure 2). However,
once elderly people’s living arrangements are adjusted, poor and non-poor elderly people did not
show much difference in the incidence and amount of the transfers.
         A breakdown of elderly people’s personal income by major categories shows the
importance of child-to-parent financial transfers in elderly Koreans’ income (Table 3). 89.3
percent of elderly people had some income and median and mean values of total income were
2,210 k and 5,280 k , respectively. As shown, child-to-parent financial transfers seem crucial
to an average elderly Korean’s income. In terms of the mean amount, child-to-parent transfers
accounted for 26.3 percent of total personal income. Table 3 also presents income from other
sources and the results accord with previous studies which have shown that elderly Koreans
depend more on their own labor and child-to-parent transfers and less on assets and public
transfers compared to old people in developed countries (Moon et al., 2005; Kim, 2003).
         Elderly people gave as well as received. As shown at the bottom of Table 3, 9.9 percent
of elderly Koreans gave money privately and the average amount was 143 k . Recipients
included children (6.1%), elderly people’s own parents (2.5%), and others (2.3%). When we
compare upward and downward transfers between elderly Koreans and their children, both the
incidence of transfers (68.1% vs. 6.1%) and its average amount (1,390 k vs. 130 k ) were
dominantly upward.
         When we analyze elderly people’s income by their poverty status, the role of child-to-
parent financial transfers is particularly notable in the poor elderly population (Table 4). While
the median total income of the non-poor elderly, 6,650 k , was about seven times higher than
that of the poor elderly, 960 k , median transfers from children did not show much difference
between the two groups. The median transfers were 350 k among the poor elderly and 400 k
among the non-poor elderly. In terms of mean values, child-to-parent transfers explained over
70 percent of poor elderly people’s income while the transfers accounted for only 13.4 percent of
the total income of their non-poor counterparts.


Elder Poverty

        Here we assess poverty among elderly Koreans in 2005. As mentioned earlier, we
estimate elder poverty by comparing elderly people’s self-support, which is based on an elderly
individual’s income except private transfers and net assets, with the predetermined poverty line.
(For the summary of assets of elderly Koreans, refer to Appendix 1.) According to this
definition of poverty, 60.8 percent of elderly Koreans are estimated to be poor.
        To compare elder poverty with poverty in the rest of the Korean population, we referred
to Cho (2007), who analyzed absolute and relative poverty at a household level using data from
the Korea Labor and Income Panel Study from 2000 to 2005. To define absolute poverty, Cho
(2007) used the poverty line announced by the Korean Ministry of Health and Welfare every
year. According to his findings, 38.2 percent of elderly households were poor while only 10.6
percent of non-elderly households were poor in 2005. Relative poverty was defined as having
household income below 50 percent of median household income. 49.8 percent of elderly
households and 14.2 percent of non-elderly households were poor in 2005. By both standards,
elderly households accounted for about 45 percent of all poor households.
        Next, we estimate the mean and overall poverty gaps among elderly Koreans. The


                                                6
poverty gap for an average poor elderly person is calculated by averageing the individual poverty
gap, that is, the gap between the poverty line and self-support.6 The estimated mean gap was
3,052 k (Table 5, panel (a)). The overall poverty gap aggregates individual poverty gap of all
poor elderly people and the estimated overall poverty gap was 8.3 billion k in 2005.
        Elderly people who live with no child are the population of particular interest since they
cannot receive any benefit from cohabitating with a child. Therefore, we estimate elder poverty
in two separate elderly groups, coresident and non-coresident ones. Estimated mean poverty gap
was 3,549 k for the coresident subgroup and 2,601 k for the non-coresident subgroup (Table
5, panel (b) and (c)). Overall poverty gap divided into 4.6 billion k for the coresident
subgroup and 3.8 billion k for the non-coresident subgroup.


Role of Child-to-Parent Financial Transfers

        Next, we examine the role of transfers from children in reducing overall poverty gap
among elderly Koreans. The overall poverty gap reduced by the transfers is estimated by
aggregating child-to-parent transfers for all poor elderly people.7 According to the estimation,
26.5 percent of elder poverty in Korea was filled by transfers from children in the entire elderly
population. By elderly people’s cohabitation status with a child, 18.7 percent of poverty gap was
filled by transfers from other non-coresident children in the coresident subgroup and 34.2 percent
of poverty gap was filled in the non-coresident subgroup.
        Child-to-parent financial transfers not only reduce poverty among the elderly but also
reduce inequality in the population. Figure 3 presents Lorenz curve in the elderly population
before and after we add the transfers to elderly people’s total income. As shown, the median
income in the elderly population increases from 600 k to 2,210 k and Gini coefficient drops
from 0.77 to 0.67 as we include child-to-parent transfers. Table 6 shows median income and
Gini coefficient by elderly people’s living arrangements. In all four elderly groups, median
income increases and Gini coefficient decreases with addition of transfers from children.


Role of Child’s Cohabitation with Elderly Parents

        Finally, we look into how children’s cohabitation with their elderly parent contributes to
reducing poverty among elderly Koreans. As mentioned, the definition of poverty in this paper
considers elderly people’s own income and assets excluding private transfers. While we
examined the role of non-coresident children’s financial transfers to their elderly parent in the
previous section, children’s cohabitation with elderly parents itself can be an important vehicle to
provide elder support. If children provide their coresident parent with substantial in-kind
transfers, such as housing, food, and clothes, the realistic poverty rate in the coresident elderly
group might be substantially lower.
        The KLOSA surveyed whether a respondent coresided with each of his or her surviving

6
  If an elderly person’s self-support was negative due to large amount of debts, the poverty line was used
for averageing instead of self-support.
7
  If child-to-parent transfers were greater than individual poverty gap, the gap was used instead for
aggregating.


                                                     7
children in 2005. According to the KLOSA data, still a substantial portion of elderly Koreans,
41.5 percent, lived with a child in 2005. When we restrict elderly people to those who had at
least one child, 42.5 percent were coresident. Under the Confucian tradition, elderly parents
have been coresident with their first son and his wife. According to the KLOSA data, among
elderly people who lived with at least one child and had at least two children of which at least
one was male, 52.6 percent of the people were coresident with the first son, showing the first son
still plays a bigger role than any of his siblings in the respect of coresidence.
         When we decompose poverty in the elderly population by elderly people’s cohabitation
status with a child, elder poverty seems mitigated substantially by the cohabitation. The
proportion of elderly people who coresided with a child was much higher among poor elderly
Koreans than among their non-poor counterparts. While 47.6 percent of the former lived with a
child, only 32.1 percent of the latter did so in 2005.



VI. CONCLUSIONS


        Using the first wave of the KLOSA data, this study adds evidence on the financial well-
being of elderly Koreans and the role of children in improving the well-being. Although the
proportion of child-to-parent monetary transfers to total parental income decreased rapidly
during recent decades, still almost 70 percent of elderly Koreans received a positive transfer
from children and the median amount was 400 k in 2005. Child-to-parent transfers accounted
for about one quarter of an average elderly person’s total income and, particularly, over 70
percent of an average poor elderly person’s income in 2005.
        About 60 percent of elderly people were estimated to be poor if we define their income
exclusive of any private transfers most of which are transfers from children. The overall poverty
gap in elderly population was 8.3 billion k and about one quarter of the gap was filled by
transfers from non-coresident children. Furthermore, the transfers reduced inequality among
elderly people. Children’s cohabitation with their elderly parent is also expected to reduce elder
poverty as the proportion of elderly people cohabitating with a child was much higher in the poor
elderly population.
        This study is limited since, due to data limitations, we are not able to measure financial
transfers between cohabiting children and their parents. We show, even excluding these
transfers, that Korean children still play a crucial role in providing old-age security of their
parents especially in financial aspects. In recent years, the Korean government has been
adopting various policies to meet increasing elder care need and to improve the welfare of
elderly population. Expansion of the Korean national pension program and introduction of the
Basic Old-Age Pension are the key policy changes to ensure financial security among the
elderly. With such changes, concerns about the crowding-out effects of family elder support by
the policies have been raised. By showing substantial economic family elder support even in the
present when family care tradition is rapidly collapsing, this study emphasizes the Korean
government should design the policies with further caution to achieve the intended goals.




                                                8
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older persons: A country profile – Korea. Journal of American Geriatrics Society, 52, p.1199-
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Choi, S. J. (2001). Changing attitudes to and promotion of filial piety in modern Korean society.
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Choi, J. (1999). The traditional characteristics reflected in the plan of modern apartment houses
in Korea. Journal of Architectural and Planning Research, 16(1), p.65-77.

Chung, K. H. et al. (2005). Elderly living status and social welfare. Korea Institute for Health
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Kim, C., & Rhee, K. (1999). Living arrangements in old Age: Views of elderly and middle aged
adults in Korea. Hallym International Journal of Aging, 1, p.95-111 (in Korean).

Kim, D. S. (2003). Changing life and welfare of the elderly. Seoul, Korea: Han-Yang University
Press (in Korean).

Kim, H. S. (2008, a). Income in old ages and role of children. Paper presented at the 1st KREIS
(Korean Retirement and Income Study) Conference, June 25. National Pension Service.

Kim, H. S. (2008, b). Intergenerational transfers and old-age security in Korea. Paper presented
at the NBER's 19th Annual East Asian Seminar on Economics, June 19-21. Korea Labor
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Korea Labor Institute. (2007). KLOSA Data File, Electronic Codebook, User Manual.

Korea National Statistical Office. (2006). Population projection (in Korean).

Korean Ministry of Health and Welfare. Basic Old Age Pension.
http://bop.mw.go.kr/front_info/sub1-1-1.jsp. Accessed on November 16, 2007.

Korean Ministry of Health and Welfare. (2006). Health and welfare year book (Bo-Geun-Bok-Ji-
Baek-Seo) (in Korean).

Moon, H. P. et al. (2006). Population ageing and private income transfers. National Research
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06-05-03. Korea Development Institute (in Korean).




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United Nations. (1996). The sex and age distribution of world population. New York.




                                               10
TABLES


Table 1. Demographic trends in Korea, 1960-2020

                                  1960      1970        1980   1990      2000   2010   2020
 % Population 65 and over          3.7       3.3        3.9    5.0       7.3    11.0   15.4
 % Population 80 and over          0.4       0.4        0.5    0.7       1.1    2.0    3.6
                            1)
 Old-age dependency ratio          6.7       6.1        6.2    7.2       10.2   15.2   21.7
 Life expectancy at birth         55.2      60.9        66.8   72.7      77.5   80.0   81.7
 Total fertility rate              5.6        4.3.      2.2    1.7       1.2    1.3    1.3
1) Population aged 65 and over / population aged 15-64 * 100

Source: United Nations. World Population Prospects: The 2008 Revision.




                                                   11
Table 2. Summary statistics of Koreans aged 65+ in 2005
                                                                       Mean
                                      Sample
                                                   Overall                    Poor        Others      Max1)
                                       size
                                                   (100%)         SD        (60.8%)      (39.2%)
 Age                                   3,981          73.09       11.55        74.63        70.71        105
 Male                                  3,981           0.39           -         0.31         0.52          1
 Education                             3,978
    <Middle school                                      0.75            -        0.83         0.62          1
    Middle school                                       0.09            -        0.07         0.12          1
    High school                                         0.11            -        0.07         0.18          1
    > High school                                       0.05            -        0.02         0.08          1
 Marital status                        3,981
    Married / cohabited                                 0.61            -        0.48         0.81          1
    Separated / divorced                                0.01            -        0.02         0.01          1
    Widowed / dispersed                                 0.38            -        0.50         0.19          1
    Never married                                       0.00            -        0.00         0.00          1
 Form of household                     3,981
    Living alone                                        0.16           -         0.19         0.11          1
    Couple                                              0.41           -         0.32         0.55          1
    Couple, child                                       0.21           -         0.22         0.20          1
    Couple, child, grandchild                           0.18           -         0.23         0.11          1
    Others                                              0.04           -         0.04         0.04          1
 Number of children                    3,981            3.93        3.08         4.01         3.80         10
    Number of sons                                      2.03        2.11         2.07         1.97          7
    No child                                            0.02           -         0.03         0.01          1
 Number of grandchildren               3,967            6.71        7.67         7.22         5.92         34
 Grandchild care
    Any                                3,967           0.06            -        0.06          0.05         1
    Total hours spent                  3,965         109.71     1,127.03      123.69         88.06     5,824
 Employed                              3,981           0.17            -        0.06          0.33         1
 Home ownership                        3,981           0.36            -        0.25          0.52         1
 Apartment (vs. house)                 3,981           0.31            -        0.31          0.31         1
 Number of ADL limitations2)           3,981           0.38         2.45        0.48          0.21         7
 Number of IADL limitations3)          3,981           1.18         4.69        1.52          0.63        10
 Subjective health                     3,981
    Very good                                           0.02            -        0.01         0.03          1
    Good                                                0.17            -        0.13         0.23          1
    Fair                                                0.31            -        0.28         0.37          1
    Bad                                                 0.37            -        0.42         0.30          1
    Very bad                                            0.12            -        0.15         0.08          1
1) Min values are zeros for all variables except the lowest age is 65
2) Activities of Daily Living (ADL) are defined as “the tasks of everyday life” and they include activities
    such as eating, dressing, getting into/out of a bed or chair, taking a bath or shower, and using the toilet.
3) Instrumental Activities of Daily Living (IADL) are “activities related to independent living” such as
   preparing meals, manageing money, shopping, and using a telephone (National Cancer Institute).



                                                      12
Table 3. Summary statistics of income and transfers of Koreans aged 65+ by source in 2005 (in
         k ≈ $)

                                           % with
                                                       Median    Mean                  Max
                                         income>01)                          %
 Total personal income                          89.3     2,210    5,280     100.0%    388,160
    Earned income                               27.3         0    2,280      43.2%    130,000
       Wage                                      7.5         0      400       7.6%     84,000
       Self-employed                            11.6        0     1,038      19.7%    120,000
       Agriculture / fishery                    14.3        0       812      15.4%     30,000
       Side job                                  2.3        0        31       0.6%      7,500
    Asset income                                16.3        0       551      10.4%    360,000
      Interest from financial assets            15.0        0       510       9.7%    360,000
      Rental income from real estate             2.0        0        40       0.8%     20,000
    Public transfers                            53.6       60       928      17.6%     36,000
      Public pension                            19.9        0       623      11.8%     36,000
         National pension                       15.5        0       242       4.6%     36,000
         Occupational pension                    4.9        0       381       7.2%     36,000
       Social security                          41.6        0       304       5.8%     19,200
         Worker’s compensation                   0.0        0        11       0.2%     19,200
         Basic Living Security                   4.9        0       148       2.8%      9,360
         Veteran’s benefits                      3.3        0        70       1.3%     18,000
          Others                                37.6        0        76       1.4%      6,000
    Private pension                              1.4        0        27       0.5%     12,000
    Other income                                 1.8        0        76       1.4%     50,000
    Private transfers from                      68.6      400     1,418      26.9%     60,000
       From children                            68.1      400     1,390      26.3%     60,000
       From parents                              0.5        0           1     0.0%        500
       From others                               2.9        0        27       0.5%     12,000
    Private transfers to                         9.9        0       143           -    40,000
       To children                               6.1        0       130           -    40,000
       To parents                                2.5        0         4           -     2,000
       To others                                 2.3        0           9         -    12,000

1) Proportion of people with positive income




                                                13
Table 4. Median and mean personal income and transfers of Koreans aged 65+ by source and
         poverty status in 2005 (in k ≈ $)

                                    Poor (60.8%)                   Others (39.2%)
                             Median    Mean                 Median     Mean
                                                    %                                %
Total personal income            960     2,028     100.0%      6,650     10,402     100.0%
    Earned income                  0       178       8.8%      1,500      5,480      52.7%
    Asset income                   0        44       2.2%          0      1,355      13.0%
    Public transfers               0       335      16.5%        120      1,881      18.1%
        Public pension             0       101       5.0%          0      1,485      14.3%
        Social security            0       234      11.5%          0        397       3.8%
    Private pension                0         8       0.4%          0         66       0.6%
    Other income                   0         2       0.1%          0        189       1.8%
    Private transfers from       400     1,462      72.1%        400      1,429      13.7%
        From children            350     1,436      70.8%        400      1,399      13.4%
        From parents               0         1       0.1%          0          1       0.0%
        From others                0        25       1.2%          0         29       0.3%




                                            14
Table 5. Mean income and assets, and poverty of Koreans aged 65+ by cohabitation status in 2005 (in k            ≈ $)

                                                (a) Overall                        (b) Living with a child         (c) Living with no child
                                                 (100.0%)                                 (41.5%)                          (58.5%)

                                    All            Poor           Non-poor          Poor         Non-poor           Poor         Non-poor
                                 (100.0%)        (60.8%)          (39.2%)         (69.7%)        (30.3%)          (54.5%)        (45.5%)

 Individual Poverty Line (a)                                  3,840 for married individuals, 4,800 for others

 Total Income excluding
                                      3,862             577              8,961           367           8,677              768           9,095
 Private Transfers (b = c - d)

     Total Income (c)                 5,280           2,001           10,370           1,481           9,855             2,473        10,614

     Private Transfers (d)            1,418           1,424              1,409         1,115           1,178             1,705          1,519

 Net Assets (e = f - g)              53,184          12,755          115,950           9,149        136,724             16,032       106,118

     Total Assets (f)                59,639          17,299          125,371          14,077        146,825             20,226       115,218

     Total Liabilities (g)            6,454           4,543              9,421         4,928         10,101              4,094          9,100

 Self-support (h = b + 0.05*e)        6,521           1,215           14,758             824         15,513              1,570        14,401

 Mean Poverty Gap
 (i = mean a – h (if a>h) or                –         3,052                  –         3,549                 –           2,601                –
     a (otherwise)




                                                                    15
Table 6. Median income and Gini coefficients of Koreans aged 65+ by living arrangements and
         financial transfers from all children (in k ≈ $)

                                        Median income                 Gini coefficient
                                    Before            After        Before           After
                                   transfers        transfers     transfers       transfers
 Separate & unmarried                  120            2,880         0.808           0.640
 Separate & married                  1,920           3,500         0.688           0.605
 With child & unmarried               120              700         0.899           0.780
 With child & married                 700            1,720         0.764           0.699




                                               16
FIGURES


Figure 1. Government expenditure for elderly welfare as percentage of the Korean Ministry of
          Health and Welfare budget and of total government budget
           14.0

           12.0

           10.0

            8.0
     (%)
            6.0

            4.0

            2.0

            0.0
                87


                        89


                                91


                                        93


                                                95


                                                        97


                                                                99


                                                                        01


                                                                                03


                                                                                        05


                                                                                                07
             19


                     19


                             19


                                     19


                                             19


                                                     19


                                                             19


                                                                     20


                                                                             20


                                                                                     20


                                                                                             20
                               % KMHSW budget                   % Korean government budget

                                                             Source: Korea National Statistical Office (2008)




                                                       17
Figure 2. Financial transfers to Koreans aged 65+ from all non-coresident children by parent’s
          living arrangement and poverty status in 2005 (in k ≈ $)1)


(a) whether an elderly person received positive transfers
                                            80.0%

                                            70.0%
      % with positive financial transfers




                                            60.0%

                                            50.0%

                                            40.0%

                                            30.0%

                                            20.0%

                                            10.0%

                                            0.0%
                                                    Separate &       Separate &   With child &       With child &
                                                    unmarried         married      unmarried           married

                                                           Poor parent             Non-poor parent




                                                                          18
(b) median financial transfers: all elderly people
                                           700

                                           600
      Median financial transfers (in KW)




                                           500

                                           400

                                           300

                                           200

                                           100

                                             0
                                                     Separate &     Separate & married      With child &      With child &
                                                     unmarried                               unmarried          married

                                                           Poor parent                     Non-poor parent


(c) median financial transfers: elderly people with positive transfers only
                                           1,400

                                           1,200
      Median financial transfers (in KW)




                                           1,000

                                            800

                                            600

                                            400

                                            200

                                                 0
                                                      Separate &      Separate & married    With child &      With child &
                                                      unmarried                              unmarried          married

                                                              Poor parent                   Non-poor parent



                                                                                19
Figure 3. Lorenz curve for income of Koreans aged 65+ before and after including financial
          transfers from children


            1
            .8
            .6
            .4




                                           Median income: 2,210k
                                           Gini coefficient: 0.67
            .2




                                                                 Median income: 600k
                                                                 Gini coefficient: 0.77
            0




                 0          .2             .4           .6              .8            1

                                   equality                  before transfers
                                   after transfers




                                                 20
APPENDICES


Appendix 1. Summary statistics of assets and debts of Koreans aged 65+ by source in 2005 (in
            k ≈ $)

                                      % with
                                                       Median       Mean              Max
                                     assets>01)                              %
Total personal assets                      77.5%           20,000   59,639   100.0%   2,001,000
   Real estate                             69.8%           20,000   55,294   92.7%    2,000,000
       Home                                66.9%           12,500   44,236   74.2%    2,000,000
       Real estate except home             15.0%               0    13,810   23.2%    1,500,000
       Security deposit                        0.4%            0       44     0.1%      50,000
   Financial assets                        41.0%               0     3,938    6.6%     503,000
       Cash, checking accounts             39.7%               0     2,420    4.1%     150,000
       Savings deposit                         4.8%            0      931     1.6%     500,000
       Stocks / trust                          0.6%            0      307     0.5%     500,000
       Insurance                               1.5%            0      136     0.2%     141,000
       Money lent                              0.7%            0      129     0.2%      60,000
       Private savings club                    0.4%            0       16     0.0%      25,000
   Other Assets                            13.3%               0      407     0.7%      75,000
Total personal debts                       21.3%               0     6,454        -   1,500,000
Net personal assets                        74.8%           19,350   53,184        -   1,951,000

1) Proportion of people with positive assets




                                                      21

				
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