In the first step, we study which parameters can the social planner afford, as in which benefit ratio – the ratio of global pensions to average wages – and contribution rate – the part of the wages that is paid to the PAYG system –, given the PAYG sustainability constraint. [...] (35)r r x=xr+1 The replacement rate δ̃t (34) is a function of the benefit ratio δt obtained in the first level, the level of pensions for old retirees, the sustainability factor β̃t corresponding to year t and the density corresponding to new retirees lxr,t. [...] 5.2 1st level: Risk-sharing between workers and retirees For the risk sharing between the workers and the retirees, we analyse the impact of this dependency ratio process on the contributions of the workers and the benefits of the retirees trough respectively the increase of the contribution rate π and the decrease of the benefit ratio δ. [...] By the end of our projection horizon, the sustainability factors in the canonical, Musgrave, and DC converge towards 1, the same level as the DB scheme, irrespective of the long-term targets β̄t and π̄t. [...] We choose the cohort retiring in 2019 as it is the one that will bear the highest effect of the baby-boom generation depicted in Figure 4(b) and is the first one to move out of the relative steady-state.
- Pages
- 33
- Published in
- Australia
