Research on the Impact of the Optimal State-owned Capital Allocation, Tax Deferral and Delayed Retirement on the Replacement Rate of Pension and Policy Optimization

In order to cope with the aging population, China has implemented individual tax deferred policy and state-owned capital allocation, and plans to raise the retirement age. Firstly, this paper comprehensively considers the above three policies and develops an overlapping generation model with three sectors: the household sector, consisting of one agent concerned with the individual tax deferred policy; the production sector, composed of state-owned and privately-owned enterprises; and the public sector responsible for comprehensive policy arrangements. Then we discuss the impact of three policies on the total replacement rate of pension benefits under the steady state and conduct the parameter sensitivity analysis. Secondly, the relationship between the three policies is explored when we set the target replacement rate. Finally, under the premise of maximizing individual’s utility and a certain pension benefits replacement rate, we find the optimal solution when one of the policies is fixed, and the remaining two are allowed to be adjusted. The study finds that the tax deferred policy has the greatest impact on the pension benefits replacement rate, and each of the policies presents inverse relations under a certain pension benefits replacement rate. When comparing with delayed retirement, individuals prefer the tax deferral and state-owned capital allocation under a certain replacement rate. JEL Classification: F842.67