Association for Public Policy Analysis & Management

Lately industrialized countries in East Asian region have been suffering from growing poverty among older adults. As a case study of South Korea, this study examines what has contributed to the growing old-age poverty. We focus on two aspects of family support for elderly people: coresidence with adult children and private income transfer from non-resident children. We also examine how effectively public transfer counteracts poverty-increasing effects of the declining family support. We use data from national surveys to analyze the changing trend in old-age poverty from 1996 to 2016. We construct a counterfactual income distribution that would have occurred if family support (or public transfer) had not changed during the examined period while everything else changed as observed. We assess the impact of changes in family support (or public transfer) by comparing poverty estimated from the distribution as actually observed in the data and the counterfactual poverty. We construct a counterfactual distribution by a conditional reweighting method pioneered by DiNardo, Fortin, and Lemieux (1996). We use, as a reweight, a probability of family support (or public transfer) conditional on correlated elderly characteristics to estimate independent impacts of changes in family support (or public transfer) on poverty. Results show that the growing elderly poverty is largely explained by the rapidly increasing number of elderly households living apart from their adult-child. The decline in private transfer income also contributed albeit to a lesser degree. Small and ineffective public transfer programs failed to curb the increase in old-age poverty.