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Pension Reforms and Adverse Demographics: Options for the Czech Republic

Martin Stepanek ()

Czech Journal of Economics and Finance (Finance a uver), 2019, vol. 69, issue 2, 149-210

Abstract: This paper estimates changes in pensions and long-term financial sustainability of the Czech pension system in the light of population ageing, market imperfections or a potential economic downturn, and assesses feasibility of various parametric and structural reforms. To do so, it develops a bespoke OLG model with heterogeneous agents, bequests, productivity shocks, market imperfections, and realistic representation of three distinct types of pension systems calibrated using real-world data. Numerical results are obtained through computer simulations. The estimates show that a well-designed multi-pillar pension scheme provides good results in a number of performance indicators without leading to excessive costs of transition, whereas maintaining the current PAY-GO scheme would lead to a gradual decrease in real pensions, lower pension-to-wage ratios, higher budget deficits, or any combination thereof, unless the statutory retirement age increases beyond 67 years by 2050.

Keywords: OLG; pension system; demographical change; general equilibrium model (search for similar items in EconPapers)
JEL-codes: C68 H55 J11 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:fau:fauart:v:69:y:2019:i:2:p:149-210