2019 Conference

Depression; Psychological well-being; Non-contributory pension; Elderly poverty; Asia; South Korea

Non-contributory social pension has been widely used to provide basic income support for the elderly. Despite its effectiveness in reducing old-age poverty, little is known about the extent to which these welfare gains improve population health. In this study, we exploit a reform to the social pension program in South Korea to examine the health effect of unconditional cash transfer. This reform represents one of the largest social welfare expansions in South Korean history and provides an excellent natural experiment for isolating exogenous variation in supplementary income. We use data from the Korean Longitudinal Study of Aging and estimate a series of difference-in-differences models. Results show that the expansion was associated with an average of 4.1-9.5% reductions in depressive symptoms among individuals age-eligible for the program. We also find that this effect operated mainly through increased financial well-being and satisfaction with one's financial condition. For measures of physical health, there is insufficient evidence that the reform resulted in improved functionality or a more positive assessment of health status. Overall, our findings suggest that public transfers through state pension will likely produce measurable mortality benefits by alleviating financial stress and preventing suicide among distressed elderly.