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Small assumptions (can) have a large bearing: evaluating pension system reforms with OLG models

Marcin Bielecki, Karolina Goraus-Tańska, Jan Hagemejer, Krzysztof Makraski () and Joanna Tyrowicz
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Krzysztof Makraski: Warsaw School of Economics; National Bank of Poland

Authors registered in the RePEc Author Service: Krzysztof Makarski

No 2014-20, Working Papers from Faculty of Economic Sciences, University of Warsaw

Abstract: The objective of this paper is to inquire the consequences of some simplifying assumptions typically made in the overlapping generations (OLG) models of pension systems and pension system reforms. This literature is largely driven by policy motivations. Consequently, the majority of the papers is extremely detailed in the dimension under scrutiny. On the other hand, complexity of general equilibrium OLG modeling necessitates some simplifications in the model. We run a series of experiments in which the same reform in the same economy is modeled with six different sets of assumptions concerning the shape of the utility function, time inconsistency, bequests’ redistribution, labor supply decisions and internalizing the linkage between social security contributions and benefits in these decisions as well as public spending. We find that these assumptions significantly affect both the size and the sign of the macroeconomic and welfare measures of policy effects with the order of magnitude comparable to the reform itself.

Keywords: pension system reform; overlapping generations (OLG); defined benefit; defined contribution (search for similar items in EconPapers)
JEL-codes: C68 D72 E17 E25 H55 J11 J24 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2014
New Economics Papers: this item is included in nep-age and nep-mac
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http://www.wne.uw.edu.pl/inf/wyd/WP/WNE_WP137.pdf First version, 2014 (application/pdf)

Related works:
Journal Article: Small assumptions (can) have a large bearing: evaluating pension system reforms with OLG models (2015) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:war:wpaper:2014-20

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