sharing high growth across generations : pensions and ... · z. song, k. storesletten, y. wang, f....
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Z. Song, K. Storesletten, Y. Wang, F. Zilibotti
Sharing high growth across generations : pensions and demographic transition in China CEPRA working paper 03/2012
10 15 20 25 30 35 40 45 50-2
0
2
4
6
8
10
12
14
16
Age
Emig
ratio
n R
ate
(Per
cent
)
Emigration Rates from Rural Areas by Age and Gender, as a Share of Each Cohort
Males
Females
2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 21000
0.5
1
1.5
Time
Popu
latio
n Si
ze (B
illion
s)
Population Dynamics of China
Total
Urban
Rural
2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 21000
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
Time
Rat
io P
opul
atio
n 60
+ / P
opul
atio
n 18
-59
Urban
Rural
Projected Old-age Dependency Ratios
2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100100
200
400
800
1600
Time
Labo
r Ear
ning
s (L
og S
cale
)
Labor Earnings Conditional on Human Capital
1960 1980 2000 2020 2040 2060 2080 21000.2
0.4
0.6
0.8
Time
Panel a: Replacement Rate by Year of Retirement
2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 21100.040.060.08
0.10.120.14
Time
Tax revenue
Expenditures, Benchmark
Expenditures, Delayed Reform
Panel b: Tax Revenue and Pension Expenditures as Shares of Urban Earnings
2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 2110-3
-2.5
-2
-1.5
Time
Panel c: Government Debt as a Share of Urban Earnings
Benchmark
Delayed Reform
Welfare Gain (Equiv . Var iation) by Year of Retirement
Year of R etirement
Wel
fare
Gai
nω
(in
Perc
ent)
2000 2020 2040 2060 2080 2100-20
-10
0
10
20
30Delay ed Reform Until 2040
2000 2020 2040 2060 2080 2100-20
-10
0
10
20
30Delay ed Reform Until 2100
2000 2020 2040 2060 2080 2100-20
-10
0
10
20
30Fully Funded Reform
2000 2020 2040 2060 2080 2100-20
0
20
40
60
PAYGO Reform
2020 2030 2040 2050 2060 2070 2080 2090 2100
1
2
3
4
5
6
7
8
Period T of Reform Implementation
Wel
fare
Gai
nω
(in
Perc
ent) High Discount Rate
Low Discount Rate
Welfare Gains of Delaying the Reform (Utilitarian Planner)
1960 1980 2000 2020 2040 2060 2080 21000
0.2
0.4
0.6
0.8
Time
Panel a: Replacement Rate by Year of Retirement
2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 21100
0.05
0.1
Time
Tax revenue
Expenditures, Benchmark
Expenditures, FF Reform
Panel b: Tax Revenue and Pension Expenditures as Shares of Urban Earnings
2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 2110-3
-2
-1
0
Time
Panel c: Government Debt as a Share of Urban Earnings
Benchmark
FF Reform
2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 21100
0.5
1
1.5
Benchmark
PAYGO
Year
Panel a: Pension Payment / Labor Earnings by Year
1980 2000 2020 2040 2060 2080 21000
10
20
30
40
Benchmark
PAYGO
Year of Retirement
Panel b: Lifetime Pension / Average Labor Earnings in the Year of Retirement, by Cohort
Sensitiv ity Analysis: Welfare Gains by Cohorts Under Different Scenarios
T (Time of Retirement)
Con
sum
ptio
n Eq
uiva
lent
Gai
n/Lo
ss (i
n Pe
rcen
t)
2000 2050 2100-15
-10
-5
0
5
10
15
20
25
Delayed Until 2040
2000 2050 2100-15
-10
-5
0
5
10
15
20
25Low Wage Growth
Fully Funded
2000 2050 2100
-10
0
10
20
30
40
50
60
70
PAYGO
2000 2050 2100-15
-10
-5
0
5
10
15
20
25
Delayed until 2040
2000 2050 2100-15
-10
-5
0
5
10
15
20
25Low Fertility
Fully Funded
2000 2050 2100
0
20
40
60
80
PAYGO
2010 2020 2030 2040 2050 2060 2070 2080 2090 21000.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
Time
Annu
al G
rowt
h Ra
te
GDPpc and GDPpw growth
GDPpc
GDPpw
2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100
7500
15000
30000
60000
120000
Time
GDP
per
Cap
ita (L
og S
cale)
GDPpc: China and US
China
US
0 10 20 30 40 50 60 70 80 90 1000
5
10
15x 10 6
Age
Panel A: Female Population
0 10 20 30 40 50 60 70 80 90 1000
5
10
15x 10 6
Age
Panel B: Male Population
SimulationData
SimulationData
1930 1940 1950 1960 1970 1980 1990 2000 20102
3
4
5
6
7
8
9
10
11
12
Birth Year
Year
s of S
choo
ling
Years of Schooling by Cohort
1960 1980 2000 2020 2040 2060 2080 21000.2
0.4
0.6
0.8
Time
Panel a: Replacement Rate by Year of Retirement
2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 21100.05
0.1
0.15
0.2
Time
Tax revenue Expenditures, Benchmark
Expenditures, Delayed Reform Until 2100
Panel b: Tax Revenue and Pension Expenditures as Shares of Urban Earnings
2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 2110
-2
0
2
Time
Panel c: Government Debt as a Share of Urban Earnings
Benchmark
Delayed Reform Until 2100
2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100100
200
400
800
1600
3200
Time
Wag
e R
ate
(Log
Sca
le)
Wage Rate in Rural and Urban Sec tors
Rural
Urban
CEPRA WORKING PAPER
01/2012
V. Galasso, P. Profeta, When the state mirrors the family : the design of pension systems
02/2012
E. García-Morán, Z. Kuehn, With strings attached : grandparent-provided child care, fertility, and female labor market outcomes
03/2012
Z. Song, K. Storesletten, Y. Wang, F. Ziliotti, Sharing high growth across generations : pensions and demographic transition in China