Publication detail

Pension reforms and adverse demographics: options for the Czech Republic

Author(s): Mgr. Ing. Martin Štěpánek M.A., Ph.D.,
Type: Articles in journals with impact factor
Year: 2019
Number: 0
ISSN / ISBN:
Published in: Czech Journal of Economics and Finance
Publishing place:
Keywords: OLG, pension system, demographical change, general equilibrium model
JEL codes: C68, H55, J11
Suggested Citation: Stepanek. M (2019) Pension reforms and adverse demographics: options for the Czech Republic. Czech Journal of Economics and Finance 69(2): 174-210
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.

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