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Early Retirement Decisions and Social Security Pension Fund in Thailand: A Monte Carlo Approach to Fiscal Implications

Author

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  • Euamporn Phijaisanit

    (Faculty of Economics at Thammasat University)

Abstract

This research paper employs the Monte Carlo experiments to assess the fiscal implications of early retirement decisions on the Social Security Pension Fund in Thailand. Most studies which have discussed this topic had employed a non-stochastic approach and emphasises the impacts of changing demographic structure of the workforce. This paper employs a stochastic approach and raises the more urgent issue of fiscal impacts and implications of the early exit from the workforce starting from 2014, the year in which the Fund started paying out regular monthly old-age benefits. The models simulate randomly distributed rates of early retirement among those aged between 50 and 54 with the mean around 5% and standard deviation of 1%. The simulations show that, on average, the Fund starts accruing net liability in 2020, and can potentially become depleted in 2058. This pinpoints to the important policy precautions that the currently high level of reserves does not imply fiscal security for the future retirees and, therefore, an urgent consideration of reform options is vital.

Suggested Citation

  • Euamporn Phijaisanit, 2016. "Early Retirement Decisions and Social Security Pension Fund in Thailand: A Monte Carlo Approach to Fiscal Implications," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 8(1), pages 62-83, January.
    • Handle: RePEc:umk:journl:v:8:y:2016:i:1:p:62-83
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    File URL: http://ijie.um.edu.my/filebank/published_article/9379/Early%20Retirement%20Decisions%20and%20Social%20Security%20Pension%20Fund%20in%20Thailand%20-%20A%20Monte%20Carlo%20Approach%20to%20Fiscal%20Implications.pdf
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    More about this item

    Keywords

    Stochastic Analysis; Early Retirement; Pension Funds;
    All these keywords.

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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