Population aging in Korea: Macroeconomic impacts and financing national health insurance

We provided a quantitative model to analyze the impacts of population aging on the Korean economy and National Health Insurance (NHI). We found that the NHI premium rate for workers should be increased by 3.7 percentage points between 2015 and 2060 to finance the augmented burden of the NHI program as a result of the aging population. Within the same period, the aggregate labor would be decreased by 30.9 percent despite the increase in employment ratio by 2.2 percentage points while the aggregate output was decreased by 18.3 percent. To make distinction between the population aging effect and the effect from the increased NHI premium rate, we conducted an experiment where the NHI premium rate for workers was held constant at the level of 2015 along the transition path. The experiment showed that the distortion effect of the increased NHI premium rate would be only minor compared to the direct effect of population aging.