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Prepared by Meral Karasulu. Janice Lee provided assistance with data.
Survey data suggest that underreporting of household incomes may overstate the debt ratio by about 22 percentage points, consistent with the estimated size of the informal economy.
An unbalanced panel regression comprising 20 countries was estimated using generalized method of moments (GMM) with country dummies and lagged values of the variables as instruments. The countries are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Korea, New Zealand, Netherlands, Norway, Sweden, Switzerland, United Kingdom and United States. The longest series in the unbalanced sample starts in 1970 and ends in 2008.
Real house prices were also included, but were not statistically significant.
The average effective retirement age is defined as the average age of exit from the labor force during a five-year period. Labor force (net) exits are estimated by taking the difference in the participation rate for each five-year age group (40 and over) at the beginning of the period and the rate for the corresponding age group aged 5 years older at the end of the period.
Although the former helps raise the sustainability of the pension system and reduce the associated fiscal burden, it also affects labor supply and saving decisions by households.
Reflecting the large number of self-employed and irregular workers, the Korean pension system has a low coverage (60 percent compared to around 85 percent for the OECD), although notional coverage was made universal in 1999.