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Urban public pension, replacement rates and population growth rate in China

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  • Yang, Zaigui

Abstract

This paper uses an overlapping generations model to investigate the urban public pension in China. It examines the effects of the replacement rates and population growth rate on the capital-labor ratio, pension benefits, consumption and utility, and finds the optimal replacement rate. It is shown that raising the individual account benefit replacement rate only induces the increase in the individual account benefits. Raising the social pool benefit replacement rate induces the increase in the social pool benefits and retirement-period consumption, while the decrease in the capital-labor ratio, individual account benefits, working-period consumption and utility. The fall in the population growth rate leads to the increase in the capital-labor ratio, social pool benefits, individual account benefits, working-period consumption and utility, and leads to a decrease in the retirement-period consumption. The optimal social pool benefit replacement rate depends on the individual discount factor, social discount factor, capital share of income and population growth rate, and it decreases in the case of falling population growth rates. It will do more good than harm to raise the individual account benefit replacement rate, reduce the social pool benefit replacement rate and strictly implement China's population policy.

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Bibliographic Info

Article provided by Elsevier in its journal Insurance: Mathematics and Economics.

Volume (Year): 45 (2009)
Issue (Month): 2 (October)
Pages: 230-235

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Handle: RePEc:eee:insuma:v:45:y:2009:i:2:p:230-235

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Web page: http://www.elsevier.com/locate/inca/505554

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Keywords: IB80 IE25 Urban public pension Replacement rate Population growth rate;

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  1. Zhang, Junsen & Zhang, Jie & Lee, Ronald, 2001. "Mortality decline and long-run economic growth," Journal of Public Economics, Elsevier, vol. 80(3), pages 485-507, June.
  2. Pecchenino, R.A., 1994. "Social Security, Social Welfare and the Aging Population," Papers 9403, Michigan State - Econometrics and Economic Theory.
  3. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, December.
  4. Samuelson, Paul A, 1975. "Optimum Social Security in a Life-Cycle Growth Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(3), pages 539-44, October.
  5. David Altig & Steve J. Davis, 1991. "Borrowing Constraints and Two-Sided Altruism With an Application to Social Security," NBER Working Papers 3913, National Bureau of Economic Research, Inc.
  6. Rowena A. Pecchenino & Patricia S. Pollard, 2000. "Dependent children and aged parents: funding education and social security in an aging economy," Working Papers 1995-001, Federal Reserve Bank of St. Louis.
  7. van Groezen, Bas & Leers, Theo & Meijdam, Lex, 2003. "Social security and endogenous fertility: pensions and child allowances as siamese twins," Journal of Public Economics, Elsevier, vol. 87(2), pages 233-251, February.
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