Title : Aging and its impact on fiscal health - A comparative analysis of the USA and South Korea
Abstract:
Population aging is reshaping the fiscal and labor market structures of advanced economies. This paper compares the United States and South Korea two countries with distinct demographic histories but converging aging profiles over the period 2000–2022. Using annual macroeconomic and demographic data, we estimate regression models to identify the determinants of the Old-Age Dependency Ratio (OADR) and assess its fiscal implications for pension expenditures as a share of GDP. Interaction models reveal substantial cross-country heterogeneity: aging in South Korea is strongly associated with rising health expenditures and longevity dynamics, whereas in the United States, higher labor force participation mitigates demographic pressure. However, once secular time trends are included, both countries exhibit statistically indistinguishable aging trajectories, indicating that demographic change is overwhelmingly structural. Finally, increases in OADR translate into significant pension expenditure growth, even after controlling for macroeconomic conditions and public debt. The findings highlight the central role of labor market participation and demographic timing in shaping fiscal sustainability in aging societies.
Keywords: Aging Population, Fiscal Health, Healthcare Costs, USA, South Korea
