Old-Age Income Security and Tourism Demand: A Quasi-Experimental Study

Abstract

A growing number of countries have introduced noncontributory pension to guarantee a minimum income for disadvantaged seniors. The current state of knowledge does not inform us how this change has impacted senior tourism demand and industry. Additional pension income may relax budget constraints and provide an opportunity to fulfill a desired level of tourism. For disadvantaged elderly, however, its impact on tourism choice is not clear because of consumption needs for other necessities and limited mobility. This study examines a recent social pension reform in South Korea to study the impact of old-age income security on tourism demand. We find that a doubling of public pension benefits is associated with an average of 23–59.5% increase in travel frequency and 52–96% rise in travel spending among benefit-eligible seniors. These results suggest that pension reforms aiming to improve old-age income security will have a positive influence on the tourism and hospitality industry.