Economic Determinants of Elderly Labor Supply: Evidence from Korea.

Abstract

I examine the effect of age, health state, the structure of various incomes on elderly labour supply in Korea. Using a data set from ?Korean Labour and Income Panel Study (KLIPS)? in 2003, we investigate how salary, financial or rental income and other factors affect elderly employee?s behavior in labour market. This is analysed by an intertemporal model of labour supply to test how prospective retirees with different income structure choose their retirement age. Traditionally, in developed countries having a stable and long history of social security pension system has been proved to induce earlier retirement among prospective retirees. However, in other countries such as Korea which experienced rapid industrialization and comparatively have a limited pension system we predict that there must be other determinants which play important role in optimal retirement decision. On the basis of empirical retirement tests among male elderly, 55~70 years old in Korea, we conclude that rental income and financial transfer from adult children have a strongly positive effect on retirement decision and that mandatory retirement is a main factor determining retirement.