Public Pension System With Economic Growth - Theory, Practice And Policy Discussions

Pension system is an essential part of the social security system. There are mainly three modes of the pension system in the world, namely, pay-as-you-go mode, full-funded mode and mixed mode. There are quite different viewpoints as to the choice of these systems in theory.Facing the difficulty of pension payment brought by population ageing, countries around the world have started to separate the pension system from national finance. The governments try to relieve themselves of the responsibility of pension payment in the future, and transfer it to enterprises and individuals.Is there any theoretic basis of the transfer? Does the government only want to reduce the responsibility promised before? What are the impacts of the pension system reform on the macro-economy? Will the economic growth and productivity benefit from the reform? Have the formation and reform of public pension system created transmission effect from pension system to saving, investment, output, and ultimately the public welfare.In this paper, the impacts of public pension system, especially the pay-as-you-go system on economic growth is analyzed. An economic model is setup to connect the key index of pension, the contribution rate, and the key index of economic growth, the productivity and fertility, which will contribute to the better understanding of the development and reform of public pension system.The first chapter briefly analyzes the formation, development and current difficulty of pension system.The second chapter analyzes the impacts of pension system on economy with the general principles of economicsThe third chapter establishes an endogenous model of public pension system and economic growth based on the overlapping generation model, andanalyzes the relationship between productivity increase, allocation efficiency and public pension system. Instead of emphasizing on the transfer from pay-as-you-go to full funded pension plan, this paper focuses on the impacts of public pension system on the factors of productivity increase rate , fertility and economic growth, and discusses the lawmaking of public pension system.The fourth chapter examines the impact of public pension system on economic growth. It is found that the transfer from pay-as-you-go to full funded pension system may be harmful to the economic growth, for both developed countries (experiencing low economy development) and developing countries (experiencing labor surplus). The founded endogenous model can be used to explain the theoretical and practical problems arisen form the latest pension system reform in developing countries.Based on the previous analyses, the fifth chapter analyzes and explains the pension system reform and practice from the perspective of international experiences, and particularly, the public pension reform of transition countries is examined. The sixth chapter discusses the related problems in the process of China pension reform theoretically, and personal opinions and suggestions are presented.