Research On The Overlapping Generations CGE Model Of Chinese Old Age Security System

Old age security is among one of the most important economic systems in modern nations. A stable and appropriate pension system guarantees the harmony development of societies. China is the largest developing country in the world, characteristics with huge populations, low-level developing status and remarkable disparity among regions. The reform of pension system is among one of the most problematic and complex issues in China.As powerful tools, overlapping generations (OLG) computable general equilibrium models have been used for old age security policy analysis in many countries. Under the framework of the real practice of China pension system, an OLG model has been setup up to analyses the macro effect, inter-generation and intra-generation utility of the pension reform. The dissertation discusses the modeling procedure, data structure, dynamic characteristics and computation implementation of the OLG model.The direct and indirect conclusions drawn from the model would offer useful comments to the refinery of the social security reforms.At the beginning, the dissertation compares the major characteristics between China and the United States. There are significant difference in the area of coverage, fund financing, pension payment and so on. Then it describes the details of the U.S. pension system, OASDI. Concerning the Chinese system, in the long run, China has to support the largest pensioner population on the earth because its own demographic structure. In the short run, the government has to deal with lots of severe obstacles during the transition process of its pension system, which include weakness of social security legislation, implicit debt, fragmentation of the administration, narrow coverage, moral hazard, low return and so on. The study reviews the above problems in detail figures and facts. The historical formation of the system is described and the possible solutions for future reform are discussed.Second, the dissertation gives an overview of the computable general equilibrium literature. Shoven-Walley model is the key prototype in CGE model research, it demostrates as a static model that consists of price equations, production equations, income equations, demand equations and market equilibrium equations. In order to build large-scale dynamic OLG model based on SW model, three aspects including the dynamic feature, the algorithm and computational technique are discussed. Then it makes a comparative analysis between recursive dynamic method and inter-temperal dynamic method.Third, taking the A-K model as an example, the dissertation describes the modeling procedures, population structures and behavior equitions of each economic agent in the economy. The emphasis is on the dynamic characteristics of the model, and three evaluation standards including macro effect, equity effect and efficiency are also discussed thoroughly. In order to extend the scale of OLG model, a simulation model has been constructed to make a full investigate of the performance of China pension system.Fourth, based on the above OLG model, the dissertation extends the model by demographic structure, which would change the parameters of the current pension system. These modifications are necessary aiming at simulating the real system. Then a population model is presented and the demographic trend is forecasted during the next dozens of years. It also makes a comparative discuss about several softwares including GAMS, GemPack et.al. All these works make a preparation for building applied old age security OLG models in following chapters.Fifth, this model simulates several old age security policy shocks on the economy; some interesting results are as following. Keeping the current pension system intact, the balance of pension fund will be surplus no more than several years. The surplus amount will keep going down, and will turn out to be negative till 2014. The second result concerns the population immigration; the burden coefficient would decrease when people immigrate from rural area to urban area. The impact model show that China would gain macro effect if levy social security tax or turnover tax instead of current social security fee system. The last result show that, salary increase rate is not as high as under the baseline model. And the solution shows the government expenditure has a significant effect on the macro economy performance, and it hint that the government can counteract the negative influence by expanding or cutting the expenditure when it implement a new old age mechanism reform. Finally, the dissertation makes a conclusion on both theoretical research and empirical simulation of OLG modeling, points out the direction of the future development, clarifies the limitation and shortcoming of the current research, then presents suggestions to refine the old age security OLG model of China.