What are the effects of expanding social pension on health? Evidence from the Basic Pension in South Korea

Abstract

• The health effect of social pension expansion among older Koreans is examined. • The expansion was associated with an 8.1–9.0% reduction in depressive symptoms. • Improved subjective well-being was the likely pathway that led to reduced depression. • The reform had no discernible impact on grip strength and self-rated health. • Mortality benefits are likely through suicide prevention among the depressed. Non-contributory social pension has been widely used to provide minimum income support for disadvantaged seniors. Despite its efficacy in reducing old-age poverty, only a few studies systematically assessed whether the benefits of social pension extend to health outcomes. In this paper, we exploit a reform to the South Korean social pension in 2014 to provide evidence on the health effects of expanding social pension. Using data from the Korean Longitudinal Study of Aging, we estimate a series of difference-in-differences models that compare changes in health of individuals age-eligible for the social pension (age ≥ 65) to those younger than the minimum qualification age (age < 65), before and after the reform in 2014. The estimates show an average of 8.1–9.0% reductions in the count of depressive symptoms attributable to the reform. We also find that the mental health benefit comes primarily from beneficiaries being more satisfied with their financial condition and overall quality of life. However, despite the large increase in income there were no significant improvements in grip strength and self-rated health. Overall, this study highlights the importance of social pension as a means of protecting mental health of disadvantaged seniors.