Tax Financing of the National Pension: A Two-Asset Heterogeneous-Agent Approach with Property Taxation
국민연금 재정 지속가능성을 위한 조세-연금 연계 분석: 부동산세를 포함한 이질적 경제주체 모형 접근
Principal Investigator: Youngjae Lee (Kyungpook National University)
Funding: National Research Foundation of Korea, Ministry of Education (Humanities and Social Sciences Research Support, Early-Career Researcher Program)
Period: June 2026 – May 2028 (ongoing)
Overview
The 2025 National Pension reform raised the contribution rate to 13% and the replacement rate to 43%, but it delays fund depletion only from 2056 to 2064, while the state's payment guarantee is now written into law. This project asks which tax instrument (income tax, consumption tax, or property holding tax) can finance the remaining gap with the least macroeconomic distortion and the greatest intergenerational fairness. It builds a two-asset (financial assets and housing) heterogeneous-agent overlapping-generations model that reflects Korean institutions, including the link between the National Pension and the Basic Pension.
Research aims
1. Compare the steady-state effects of income, consumption, and property taxes on labor supply, capital, consumption, wealth distribution, and welfare by generation and income group.
2. Evaluate property holding tax as a pension financing source, including its effects on portfolio choice, wealth inequality, and housing costs.
3. Simulate the transition to an aging economy and derive the welfare-maximizing tax mix.
Related work
Lee, Y., Hong, J. H., & Han, J. (2019), "The Redistribution Effects of National Pension in Korea: Analysis Using Life-Cycle Model with Heterogeneous Agents," Korean Journal of Economic Studies, 67(3), 5–44.
Results and materials from this project will be posted on this page.