KDI - Korea Development Institute - RESEARCH - Research Areas

Summary

KDI FOCUS Building a New Safety Net for Sick Workers

The effective rollout of the Sickness Benefits as a social safety net for sick workers hinges on sick leave readily accessible in the workplace. To that end, sickness benefits should include assistance for firms vulnerable to extra costs incurred by sick leave. Also, the level of sickness benefits should be differentiated based on the duration and severity of illness or injury. To ensure the sustainability of Sickness Benefits, the scheme further requires measures to strengthen medical certification and to support workers’ return to work after a spell of sick leave.

- In the aftermath of COVID-19, Korea is pushing for a homegrown model of sickness benefits, but its scheduled pilot project seems to fall short as an effective safety net for sick workers.

- For the sickness benefit scheme to operate effectively, it is crucial to have institutional backing that allows workers to take time off work, such as short-term and longterm sick leave.

- Of regular workers in business establishments with 300+ employees, 72.2% are eligible for sick leave, contrary to only 7.1% for nonregular workers in businesses with fewer than 30 employees. This finding indicates a considerable gap in sick leave entitlements among workplaces of different sizes and job security.

- Amidst the disparity in accessibility to sick leave, there exists a health gap between regular and nonregular workers, and the systemic health divide goes further among non-regular workers by contract types.

- Exposure to harmful working conditions with potential negative health impacts shows systematic disparities depending on employment type.

- For sickness benefits to effectively protect vulnerable workers,the establishment of a sick leave system and the improvement of workers’ health and working environment are necessary.

- Workers with the experience of hospitalization, which defines health shock in this study, are found to experience a continued decline in their employment and income afterward.

- In particular, a prolonged decline in earnings is most pronounced among displaced workers by sickness, which suggests the need to support them to remain connected to the labor market, coupled with financial assistance.

- As workers experience varying impacts on their employment and income depending on the severity of sickness, the benefit coverage for those suffering from serious diseases needs to be further expanded for safety nets to provide more practical support.

- While improving the receptivity of employers by providing financial assistance to employment costs incurred by its adoption, unpaid sick leave, at least, should be made into law to prevent the sickness benefit scheme from operating in two modes.

- Repeated receipt of sickness benefits for shortterm minor sicknesses should be discouraged by applying different income replacement ratios per the severity of illness. At the same time, long-term severe diseases should receive more robust protection in the safety net.

- Stringent medical certification is required to mitigate the moral hazards of sickness benefits.

- The benefit scheme should add workability evaluation in its medical certification to move toward an active labor market policy that promotes returning to work.

Summary

Research Monograph KOR Redesigning Safety Nets as a Response to New Challenges

The safety net faces new challenges. Non-regular workers are increasing with diversifying forms of employment, but the current safety net does not protect these new types of workers. The COVID-19 crisis highlights the lack of protection for these workers in our existing safety net. Also, the transition to a digital and eco-friendly economy is expected to trigger drastic changes in jobs and put burdens on the most vulnerable workers, which requires strengthening the safety net.

This study examines the limitations of the current safety net in rapidly changing economic and social conditions and provides ways to restructure it in response to new challenges. This study consists of four chapters: income support system, employment safety net, adult education and training, and safety net for sick workers. These four fields have revealed major problems in the COVID-19 crisis and need to be addressed and strengthened to build a comprehensive safety net.

Chapter 1 examines the effectiveness of the income support system during the COVID-19 period and provides an overall evaluation of the system in terms of inclusiveness, poverty reduction, economic responsiveness, and consistency. Chapter 2 analyzes what causes blind spots in the employment safety net and estimates a structural model, including unemployment insurance for the self-employed and unemployment assistance, to suggest policies for a comprehensive employment safety net. Chapter 3 investigates the characteristics of users and non-users of adult education and training voucher programs and examines why the most vulnerable groups in need of the programs do not use vouchers. Chapter 4 analyzes the state of the safety net supporting sick workers and examines the impact of health shock on employment and income to provide implications for the design of sickness benefits.

These four chapters share a common concern about the safety net's wide blind spots, especially for vulnerable workers, and discuss policy tasks. First, the employment safety net does not provide protection for temporary, non-regular workers and the self-employed due to limited unemployment insurance coverage. Also, income support programs for the working-age group are not responsive to economic needs, and support against economic difficulties is insufficient. This study suggests strengthening unemployment assistance for the low-income and vulnerable workers to enhance the inclusiveness and economic responsiveness of the safety net. Second, although anyone can participate in adult education and training institutionally, the actual participation rate of the vulnerable is low. This study points out that it is important to induce their actual participation, not simply an external expansion. Third, insecure workers are less likely to access sick leaves than secure workers. Due to the disparity across workers, sickness benefits under discussion for adoption may also have practical blind spots for vulnerable workers. This study discusses policies that need consideration when designing sickness benefits to provide a secure safety net for sick workers.

Summary

Policy Study KOR A Study on Effective Innovation Policy: Focusing on Vaccine R&D

Vaccines can be an effective means to cope with infectious diseases from a social point of view, but investment by private firms in the development of new vaccines could be suboptimal. First, this study briefly discusses a typical vaccine development process and the characteristics of a vaccine product to explain the causes of this market failure.

Next, this study analyzes the optimal use of ‘push incentives’ and ‘pull incentives’ to enhance R&D incentives for a vaccine development firm. More specifically, here, push incentives can lower R&D costs and alleviate the firm’s financing constraint (regardless of R&D result); pull incentives can raise the level of reward from a successful R&D result. This study shows that (i) it is optimal to use only push incentives if the firm faces severe financing constraints, and the social planner’s budget is relatively small; (ii) It is optimal to use both push and pull incentives if the firm faces severe financing constraints, and the social planner’s budget is relatively large; (iii) It is optimal to use only pull incentives if the firm does not face any financing constraints; (iv) In cases where the rewards that the firm can obtain from a successful R&D result are quite limited (i.e., the market size is small), providing push incentives alone is not sufficient to enhance the company's R&D incentives.

Lastly, after examining vaccine R&D support policy in Korea and a few other foreign countries, this study provides relevant policy implications, including the circumstances under which providing pull incentives play an important role, the need for a vaccine innovation policy for harmonious use of push and pull incentives, and institutional improvements required to use pull incentives more effectively.

Summary

Policy Study KOR A Study on Job Displacement of Middle-Aged Male Workers During Economic Crisis in Korea

This study explores long-term consequences of unexpected job displacement among middle-aged male workers during the 1997 Asian Financial Crisis in Korea. Utilizing datasets from the Korean Labor and Income Panel Study (KLIPS) and Korean Longitudinal Study of Aging (KLoSA), the research examines this cohort's work trajectories, socioeconomic status, and health implications. The study further investigates the intergenerational impacts of job displacement, with a spotlight on education expenditure, education attainment, and labor market outcomes of the children of the affected workers.

The findings reveal that these workers could not regain their pre-crisis employment levels, and their job quality declined due to repeated cycles of unemployment and reemployment. This trend shortened their active years in the workforce, leading to decreased pension contributions and reduced income levels in their later years. Moreover, job displacement adversely influenced their mental well-being, with a marked increase in depression rates within this group. Lastly, children of displaced fathers are observed to spend less on education. They display lower enrollment rates in higher educational institutions and often lean towards majors with more direct employment prospects. Economically, these children's annual earnings are roughly 9.4% beneath those of their peers whose fathers remained insulated from job displacement during the crisis.

Summary

Policy Study KOR A Study on Improvement of Long-Term Care Hospital Utilization and Payment Systems

In response to the change in incentives of a payment system, hospitals may change treatment behaviors. In 2008, per diem prospective payment system(PPS) was adopted for long-term care hospitals(LTCHs), which was intended to deter the medical care expenditure growth. This study identifies economic incentives of the PPS and investigates how the PPS affects the treatment intensity and types of patients of LTCHs using LTCH admissions dataset. Results indicate that the length-of-stay(LOS) per discharge increases, while average daily payment decreases. The change in the LOS varies by characteristics of illness and the LOS increases more among the low-severity patients. The probability of admissions for low-severity patients also increases. This suggests that patient selection may occur within the hospital because of insufficient differences in the payment level by severity of illness. The intensity for fee-for-services(FFS) applied treatment increases which suggest that spillover effects exist from the PPS adoption. The economic incentives of the PPS induce these unexpected and distorted utilizations of LTCHs. It is necessary to redesign payment system to offer economic incentives to strengthen medical functioning of LTCHs.

Summary

Research Monograph KOR Study on Innovation of Medical Industry

This paper observes the outcomes of innovations in medical industries and seeks ways to encourage firms to innovate. We measure the economic value of increase in life expectancy and health which are the ultimate goals of medical healthcare. We also analyze the value of medical research and development (R&D) and its ripple effects. We observe innovating factors such as medical industry licensing conditions to provide the outcome of medical R&D. We also show some examples of innovation such as the medical service field.

According to the research on economic value of health improvement that is followed by medical R&D, section 2 shows that elderly population is expected to increase from the effects of increase in overall population, income level, and disease survival rate. Decrease in mortality will also play a role in increasing the population. The estimated economic value of 10% decrease in mortality due to the medical R&D is 2,576 Trillion Won. Medical R&D helped develop the national healthcare in the past and has further potential. But, we need to make sure it goes on the right path and maintains cost efficiency.

In section 3, we look at direct and indirect contributions that medical R&D has on economic surplus. Economic value is directly affected by observing value-added and labor market employment. The surplus change is correctly and accurately measured when considering the indirect effect from other industries. Technological value analysis tells us that the contributions from medical R&D to the society are lower than those from high-technology manufacturing industries. The fact that it takes longer period of time for the effects to kick in might be the reason. Pharmaceutical and medical device industries benefited from R&D whereas employment suffered. Thus, the government should be attentive to the pros and cons of the medical R&D to benefit in the short and long run when forming a policy or regulations.

Section 4 examines the factors that optimize the economic surplus from medical innovations. Long run plan needs to be set to encourage R&D that increases the scale and positive outcome relative to the investment spending. To achieve this, network system like global medical R&D associations is necessary.

In the last section, innovation examples in the medical service field are listed. Because there exists an information asymmetry between the demand and supply of medical service industry, it is necessary to construct a system that satisfies the interest of both the consumers and investors. We observe that cost efficiency could be achieved through the supply side’s effort and increase the quality of medical service through commission based payment system (P4P).

When compared to other developed countries, Korean healthcare medical R&D needs more formal structure and promotion. The induced effect from the advancements in medical industry promotes more economic growth than that from other industries. Thus, we need to find ways to increase R&D spending and its results that stabilize the labor market. Enhanced regulations to increase the quantity and quality of medical industry are required. The regulatory reform should be conducted with long run plans to achieve this goal.

Summary

Policy Study KOR Primary Care and Health Care Reform in Korea

This study aims to provide an insight into the development of primary care in Korea. Primary care is fundamentally a health systems orientation or reform concern which can be defined by defining what it tries to displace. For that reason, primary care is undeniably a highly varied notion, and primary care reforms differ substantially across countries due to different policy inheritances and different problems they face. In this study, we tried to identify problems that need to be tackled urgently in the context of historical development of Korean health care system and primary care. Among many aspects of the reform proposals, we have primarily been concerned with the increasing importance of building knowledge base, or policy infra for more consensus based policy process. The importance of fostering a more pragmatic and gradual approach such as encouraging voluntary models in the private sector instead of imposing forceful measures was also emphasized.

Summary

Policy Study Family Background and Child Health

Socioeconomic inequity in health is of concern in many developed countries. In Korea, authorities have started to recognize the need to address this issue, as evidence on its adverse Consequences grew. Health inequity in children receives particular interest because of its potential long-run implications on adult outcomes such as educational attainment and labor market success. Disadvantages occurring at this early stage may be hard to mediate and costly to reverse.

This study is an investigation into the relationship between child health and family background using nationally representative data from the Korean National Health and Nutrition Examination Survey. It confirms the existence of a socioeconomic gradient in child health, examines the role of nutrition and diet-related factors, and provides an evaluation on the income-related inequity in the distribution of health care utilization.

Summary

Policy Study KOR Aging Population and Medical Cost

Rising medical costs due to aging population have been a growing concern to both elderly households and the National Health Insurance (NHI). While previous research is preoccupied with forecasting medical costs under the assumption of constant or constantly rising age-medical cost profile, this paper analyzes the medical cost of the elderly taking account of their income, health status, health insurance coverage, etc. Moreover, “time-until-death”, the more important factor affecting medical costs than “time-from-birth”, is included in the analysis.

Among the results, the number of elderly aged 65 and over has increased with declining mortality and their self-reported health status has improved possibly due to increasing prevention. The medical cost for the elderly has increased significantly since 1999 to represent 30.79% of the total NHI cost in 2008. Simultaneously, the medical cost for the poor elderly under the Medical Aid Program increased to 41.4% of its total cost in 2009. Increased use of medical care, especially inpatient care, is shown to have contributed significantly to these results.

Furthermore, the distribution of medical cost is skewed to the right for the elderly and spreads out as their age increases. In addition, the medical cost during the last year of life is significantly high but declines with age at death. These results mean that for the sake of better health policy on rising medical costs with aging population, both distribution of medical cost and “end-of-life” medical cost should be taken into consideration together with such factors as income, health status, and health insurance coverage. Lastly, measures to improve the health status of the elderly and to reduce the use of costly medical services should be taken to achieve the financial sustainability of the National Health Insurance and Medical Aid Program.

SITEMAP

HOT ISSUE

Summary

Summary

Summary

Summary

Summary

Summary

Summary

Summary

Summary

Welfare Economics

Summary

Summary

Summary

Summary

Summary

Summary

Summary

Summary

Summary