A Preliminary Study for Developing a Mid- to Long-Term Analytical Model of Old-Age Poverty

Abstract

This study aims to establish a foundational framework for modeling long-term elderly poverty in Korea, where rapid population aging and high elderly poverty rates persist as major social challenges. Recognizing the need for a structured approach to long-term poverty analysis, the study systematically reviews the concepts of poverty, measurement indicators, and analytical methodologies, and examines both macroeconomic and microsimulation modeling approaches. Specifically, the study develops two separate models: a dynamic stochastic general equilibrium (DSGE) model to evaluate the macroeconomic effects of social protection reforms, and a dynamic microsimulation model (MSM) to project elderly poverty under different policy scenarios. The DSGE model incorporates endogenous labor supply and includes Korea’s key old-age income security schemes—National Pension, Basic Pension, and Public Assistance. The MSM, based on the KIHASA SIM platform, is refined to simulate elderly poverty dynamics across birth cohorts. While the models are exploratory in scope, they offer a methodological basis for projecting income distribution outcomes and assessing poverty reduction effects of future reforms. The findings underscore the urgency of alleviating poverty among the current elderly population, while also highlighting the need for stronger policy measures such as narrowing the coverage gap in contributory pensions and reinforcing minimum income guarantees. Collectively, these contributions lay a foundation for advancing policy modeling tools that can inform future pension reforms and support effective strategies to reduce elderly poverty.