Population Aging, Pension Systems, and Economic Growth: Applying an Overlapping Generations Model to the Informal Sector

Navarat Temsumrit
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Navarat Temsumrit: Kasetsart University, Chatuchak, Bangkok, Thailand

Asian Development Review (ADR), 2023, vol. 40, issue 02, 305-341

Abstract: This paper analyzes the effects of an unfunded pension system on economic growth using an extended overlapping generations model to include the informal sector. Emerging countries usually have a more significant informal sector than advanced ones. The findings based on the Thai economy data suggest that an increase in unfunded pension payouts and the noncontributory old-age allowance induces lower output and changes the consumption profiles of the workers. Furthermore, it reduces households’ incentives to save and provide labor, especially among formal workers, which lowers the physical capital stock in the new steady state.

Keywords: aging population; human capital; informal sector; old-age allowance; overlapping generations model; public pension system (search for similar items in EconPapers)
JEL-codes: E26 E27 H55 O17 O41 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1142/S0116110523500154

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