A simulation framework to project pension spending: The Czech pension system

Falilou Fall and Paul Cahu

No 1657, OECD Economics Department Working Papers from OECD Publishing

Abstract: This paper presents a simulation framework developed to assess the impact of ageing on the financial sustainability of the Czech pension system. It accompanies the publication OECD Reviews of Pension Systems: Czech Republic. The framework has two components: a macroeconomic model to project long-term GDP and a cohort model to simulate the evolution of pensions. The macroeconomic model takes into account the evolution of the labour force and productivity. The cohort model simulates the career of a representative sample of the working-age population and their path in retirement. It replicates and projects the main features of the labour market, in particular, participation, wage and unemployment. It captures non-linear features of the pension system and distributional effects. The model estimates and simulates the main demographic variables of the pension system, in particular, the number of old-age pensioners and disability pensioners. It allows to simulate different policy options to close the financing gap of the pension system. Pension spending is projected to increase to 11.9% of GDP in 2060 from 8.2% in 2018, leading to increasing deficits of the pension system. Among the different options to close the financing gap, further increasing the retirement age after 2030 in line with life expectancy gains appears to be the most efficient policy measure to boost growth and reduce the financing needs. However, additional measures would be needed to close the financing gap of the pension system.

Keywords: Ageing; Czech Republic; financial sustainability of pension systems; Pay-as-you-go-system; pension reform; pension simulation frramework; pensions (search for similar items in EconPapers)
JEL-codes: H55 J11 J18 J26 (search for similar items in EconPapers)
Date: 2021-02-16
New Economics Papers: this item is included in nep-age, nep-cmp and nep-tra
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1787/e4e79fad-en (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oec:ecoaaa:1657-en

Access Statistics for this paper

More papers in OECD Economics Department Working Papers from OECD Publishing Contact information at EDIRC.
Bibliographic data for series maintained by ().