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A comparison of catching-up premium rate models

Author

Listed:
  • Jan Bonenkamp

Abstract

The total pension premium rate consists of two components, the contribution rate and the catching-up premium rate. The contribution rate finances the accrual of pension rights while the catching-up premium finances (possible) wealth deficits of a pension fund. The contribution rate and the catching-up premium rate have a different effect on the economy.The models are different in that the PA model is a solution to a static optimisation problem, while the optimisation problem in the LQR model is dynamic. With respect to the economic principle of premium smoothing, it turns out that the LQR model is the preferable model. In addition, the simulation outcomes of this model are more consistent with the institutions of the Dutch pension system.

Suggested Citation

  • Jan Bonenkamp, 2005. "A comparison of catching-up premium rate models," CPB Memorandum 127, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:memodm:127
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    File URL: https://www.cpb.nl/system/files/cpbmedia/publicaties/download/memo127.pdf
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    References listed on IDEAS

    as
    1. Lars Ljungqvist & Thomas J. Sargent, 2004. "Recursive Macroeconomic Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 026212274x, December.
    2. Burkhard Heer & Alfred Maußner, 2024. "Dynamic General Equilibrium Modeling," Springer Texts in Business and Economics, Springer, edition 3, number 978-3-031-51681-8, January.
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    Cited by:

    1. Nick Draper & Alex Armstrong, 2007. "GAMMA; a simulation model for ageing, pensions and public finances," CPB Document 147, CPB Netherlands Bureau for Economic Policy Analysis.

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    More about this item

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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