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Population Growth Rate, Life Expectancy and Pension Program Improvement in China

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  • Yang, Zaigui

Abstract

Applying an overlapping-generations model with lifetime uncertainty, we examine in this paper China’s partially funded public pension system. The findings show that the individual contribution rate does not affect the capital-labor ratio but the firm contribution rate does. The optimal firm contribution rate depends on the capital share of income, social discount factor, survival probability, and population growth rate. The simulation results indicate that the optimal firm contribution rate rises with China’s life expectancy but, surprisingly, falls with the population growth rate. We demonstrate that the optimal firm contribution rate should be cut when the effect of falling population growth rate is greater than that of rising life expectancy and that the rate is much more sensitive to the population growth rate than to life expectancy. This paper also solves the optimal interval to cope with China’s population aging peak in the 2030s.

Suggested Citation

  • Yang, Zaigui, 2008. "Population Growth Rate, Life Expectancy and Pension Program Improvement in China," MPRA Paper 18789, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:18789
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    References listed on IDEAS

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    More about this item

    Keywords

    Public Pension; Population Growth Rate; Life Expectancy;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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