Economic Impact Of Aging And Selection Of Pension Systems In China

The 21st century is the era of population aging. Up until now, all of the developed nations have stepped into aging society and many developing countries are being or are about to enter aging society. As a developing country, China entered into aging society in 1999,becoming one of the countries which got into aging society faster than the speed of the economic development. Furthermore, China has the greatest number of aging population, which accounts for nearly 20% of old population all over the world. With the rapid increasing of old population and sustainable aging of population expected to occur in China over coming decades, the current pension system is facing rigorous challenge posed by aging. The growing gap between the need of pension funding and the supply restrict the development of pension systems and the sustainable development of economy. Pensions have the broadest coverage and frequently the largest cost of any program in the entire social security systems. With the development of aging, the pension systems have become a major burden of public finance. Aging has also a passive effect to the macroeconomics; it is clear that one of the most-if not the most important interaction between savings and ageing centeres on pensions. The design of the pension systems become the key point of the sustainable development of economics in an aging society, this is just the setting of why I chose this research topic.Basing on theoretical analysis tools of life cycle theory and over lapping generations'model, this paper carries out a series of theoretical analysis. Such as basing on the general and special analysis of the impacts of aging on the macroeconomics, analysis of the effects of aging on pension schemes and analysis of the effects of pension schemes on saving and capital accumulation. This paper try to examine the channel through which aging will shape the main economic factors and in turn affect the potential growth, the answer is that it is the pension insurance systems, which act as the channel between aging and potential growth. If we design the pension insurance system properly, impetus to policy reform will temper the adverse effects of aging on economic. The purpose of the writing of this paper is seeking best old-age insurance system design that can bring about balance between insurance and minimizing the distortion of labor market, insurance and moderate accumulation of capital, at the same time, incentive-insurance are compatible.This paper is structured as follows:chapterâ… remarks to explain the background of writing this dissertation including significance, literature review, writing perspective, and research methods. Chapterâ…¡begins with a brief discussion of demographic issues. Analyzing the development of population aging, trends and their causes are, this chapter is the opening of the entire thesis. First, the author analyzes the international developments of aging and the trends, and then the author predictsed the development of China's aging trend and summarizes the character of aging. In this basis, leads to chapterâ…¢, the challenges of aging on pension system. After the general analysis of the impact of aging on pension systems, the paper then analyze the impact of aging on pension system facing the fact of aging before rich in China. Then the author compares the characteristics of the two systems-pay-as-you-go system and the full funded system. Chapterâ…£of this paper analyzes the impact of aging on macroeconomics, the impact of pension systems on capital accumulation and labor supply. This chapter is a chapter inheriting the former and indicating the latter and is the core chapter of the thesis. This chapter analyzes the effects of aging on labor market at first, followed by the impact of aging on savings and consumption, concluding that aging leads to reduction in labor supply and increase in the structure of labor force age. Unless a breakthrough of technology advances, the labor force productivity will decline. In western countries aging tend to reduce the total amount of national savings in turn the economic growth rate, while in China, the empirical results of the study is the impact of aging on savings is positive, that is, along with the development of aging, the savings rate will increase. Subsequent analysis is the macroeconomic effects of pension insurance system, using life-cycle model and over lapping generations model analysis has shown that:on the setting of aging, pay-as-you-go insurance system will give rise to the negative incentives to labor supply, leading to distortions effects of labor market, such as early retirement, less positive labor force participation and so on. And also in the long-term, aging of the population tend to lead decline in the savings rate, the funded system is able to overcome the threaten of aging on sustainable development pension systems, and eliminate the negative effects of pension insurance system on labor market, savings, capital accumulation in turn the economic growth. The accumulation of pension funds will play a stimulating role to develop and improve the capital market. Furthermore, the government will become more determined and pressure to improve the construction and financial supervision mechanisms that have a positive impact on the macro economy. However, the full funded pension system will lose the income redistribution function, the balance between insurance reduce the distorting effect is still the main point of pension insurance reform. Chapter V first introduces the evolution of China's pension insurance system, then give an economic evaluation to our existing pension system reform, particularly with regard to necessity and feasibility to do real of individual accounts. On this basis, equity and efficiency to do real the individual accounts were analyzed, conclusion is-integration of pay-as you go system and part funded insurance system is an incentive-compatible design. The last chapter is the polices recommendations of China's pension insurance system, pension insurance system in China put forward the design principles including the framework of the pension insurance system, the social security funding management and operation.The study methods are mainly inter-disciplinary method, macro-economic analysis method, combination of normative and empirical, historical and logical. The main innovations of the paper are:(1) Innovation of research perspectives. The paper study how can we weaken the adverse impact of aging on the economy and maintain the sustainable development of the pension system with the pension system as a medium. (2) Innovation of point of view. China is facing the same demographic problem with the western countries-fast development of aging society. However different from the Western countries in transition through the system to rise the savings rate in turn stimulates economic growth.One of the objectives of pension reform is to expand the coverage of the system to stimulate consumption and economic growth. In addition, proposed pension system reform is not an event, but a long process. (3) Research method innovtion. Using aging and economic growth as the threshold respectively, this paper set out a dynamic threshold regression analysis. From the basic model, that does not include other control variables in the model, to the structural model including the control variables, and then to threshold model that examines threshold effects. The method overcomes shortcomings of the time-series analysis, cross-sectional data analysis, and panel data analysis, and arrives at a convincing conclusion, informative and rich in content.