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Pension Reforms and Adverse Demographics: Options for the Czech Republic

Author

Listed:
  • Martin Štepánek

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)

Abstract

This paper estimates changes in pensions and long-term financial sustainability of the Czech pension system in the light of population ageing, market imperfections or a potential economic downturn, and assesses feasibility of various parametric and structural reforms. To do so, it develops a bespoke OLG model with heterogeneous agents, bequests, productivity shocks, market imperfections, and realistic representation of three distinct types of pension systems calibrated using real-world data. Numerical results are obtained through computer simulations. The estimates show that a well-designed multi-pillar pension scheme provides good results in a number of performance indicators without leading to excessive costs of transition, whereas maintaining the current PAY-GO scheme would lead to a gradual decrease in real pensions, lower pension-to-wage ratios, higher budget deficits, or any combination thereof, unless the statutory retirement age increases beyond 67 years by 2050.

Suggested Citation

  • Martin Štepánek, 2019. "Pension Reforms and Adverse Demographics: Options for the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 69(2), pages 149-210, April.
    • Handle: RePEc:fau:fauart:v:69:y:2019:i:2:p:149-210
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    File URL: http://journal.fsv.cuni.cz/storage/1434_174_210_stepanek_final_issue_2_2019.pdf
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    Citations

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    Cited by:

    1. Martin Stepanek, 2022. "Sectoral Impacts of International Labour Migration and Population Ageing in the Czech Republic," Computational Economics, Springer;Society for Computational Economics, vol. 60(2), pages 375-400, August.

    More about this item

    Keywords

    OLG; pension system; demographical change; general equilibrium model;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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