Sustainability and inequality of Taiwan's National Pension Insurance

Abstract

Taiwan's National Pension Insurance (NPI) is a compulsory defined benefit pension insurance scheme. However, paying the NPI premium is not mandatory. We use the NPI administrative data of more than 489 million observations to investigate the NPI's sustainability and inequalities for various groups. We find that NPI participants pay their premiums either consistently or not at all. Although the overall willingness to pay the premiums has been declining, one group of the insured persons consistently pays, thereby maintaining the sustainability of the NPI. Intergenerational and intragenerational inequalities are both found in the NPI; however, the government's premium subsidy reduces intragenerational inequality, except for young adult males who need the NPI and regularly pay premiums. Our empirical results suggest that subsidising these young male citizens strengthens the NPI's sustainability and mitigates the intergenerational and intragenerational inequalities of the NPI.