Child and Elderly Care in South Korea: Policy Analysis Using CGE Model

/ / Conferences, Economic Modeling, Expert Dialogues & Forums, Policy, Rethinking Macroeconomics

In Korea, fertility is constantly decreasing, and it is currently very low, the size of the elderly population is going up, and at the same time, the size of the child population is going down, the gender wage gap is the highest among the OECD countries at about 35%. Given this context, Dr. Martin Cicowiez (Universidad Nacional de la Plata) discussed a computable general equilibrium (CGE) model for South Korea developed with Hans Lofgren (World Bank) that assessed the impact of different policies related to childcare, elderly care, and the gender wage gap on the distribution of paid care and unpaid care in households, on the second day of the Concluding Annual Meeting.

Dr. Cicowiez stated that a well-structured and disaggregated model could capture the role of government policies in addressing these challenges and further inform policymaking by establishing links between care, female labor force participation, gendered wage discrimination, and social and economic outcomes such as household wellbeing.

The model features three representative households based on their care needs: working-age head with children, working-age head without children, and elderly head. And three simulations: increase in government spending on childcare, increase in government spending on eldercare, and a decrease in the wage gap by 50%. The results show an increase in time spent on paid work for both men and women if there is an increase in government spending on childcare and this increase is higher for females. The effects of increased government spending on elderly care and a decrease in the wage gap are similar but relatively smaller. All three simulations demonstrate a switch from unpaid care to market care services. It is worth noting that females experience decreased leisure when the analysis includes time spent on leisure activities. These results underscore the tradeoffs of macroeconomic policies targeted at care work.

To watch the full presentation, see below.

Written by Praveena Bandara, Research Assistant for the Care Economy Project and PhD student in Economics at American University.

 

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