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Population Ageing and Pension System Reform in China: A Computable Overlapping-Generations General Equilibrium Model Analysis

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  • Hongxin Li
  • Marcel Merette

Abstract

Over the next 50 years, China will face an increase of its old-age population by approximately three times. Such a demographic change may result in a large increase of pension payments, which would require a significant rise in the pension contribution rate. This also implies important intergenerational redistribution issues and may even harm living standards as a whole. This paper analyses for China the economic impact of an ageing population by means of a computable dynamic general equilibrium model with an overlapping generations structure. The paper explores the effect on the social security system and economic development of China under alternative scenarios for the benefit rates on pensions, retirement age and technological progress. Our research indicates that a pension reform plus positive technological progress can compensate for the menace of a decline in living standards for both seniors and working generations.

Suggested Citation

  • Hongxin Li & Marcel Merette, 2005. "Population Ageing and Pension System Reform in China: A Computable Overlapping-Generations General Equilibrium Model Analysis," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 3(3), pages 263-277.
    • Handle: RePEc:taf:jocebs:v:3:y:2005:i:3:p:263-277
    DOI: 10.1080/14765280500317908
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    Citations

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    Cited by:

    1. Anping Chen & Nicolaas Groenewold, 2017. "An increase in the retirement age in China: the regional economic effects," Applied Economics, Taylor & Francis Journals, vol. 49(7), pages 702-721, February.
    2. Tyrowicz, Joanna, 2020. "Are incentivized old-age savings schemes effective under incomplete rationality?," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224526, Verein für Socialpolitik / German Economic Association.
    3. Koka, Katerina & Kosempel, Stephen, 2014. "A life-cycle analysis of ending mandatory retirement," Economic Modelling, Elsevier, vol. 38(C), pages 57-66.
    4. Joanna Tyrowicz & Krzysztof Makarski & Artur Rutkowski, 2020. "Fiscal incentives to pension savings – are they efficient?," Working Paper series 20-06, Rimini Centre for Economic Analysis.
    5. Bairoliya, Neha & Canning, David & Miller, Ray & Saxena, Akshar, 2018. "The macroeconomic and welfare implications of rural health insurance and pension reforms in China," The Journal of the Economics of Ageing, Elsevier, vol. 11(C), pages 71-92.
    6. Jan Hagemejer & Krzysztof Makarski & Joanna Tyrowicz, 2013. "Efficiency of the pension reform: the welfare effects of various fiscal closures," Working Papers 2013-23, Faculty of Economic Sciences, University of Warsaw.

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