Enterprise Annuity, The Optimal Design

Since 1970s, there has been a great upsurge of reform around the world in endowment insurance system and retirement system after the appearance of a series of problems such as Petroleum Crisis, Endowment Crisis and Aging Crisis. Each country around the world has put forward the idea of setting up enterprise pension system and has put it into effect. Our country is no exception.In the firm pension system employed in China, firm sets up the pension system voluntarily, then what impulses the firm to and how the optimal pension is designed is an issue that must be dealt with when constructing firm pension system in China. There are lots of literatures on the motivation of firm to offer pension, but rarely on how the optimal pension is designed, so in this dissertation, the focus is on the optimal design of firm pension. As the firm set up firm pension freely in the pension system employed in China, I solve the problem from the perspective of firm which aims at the maximum of profit.In the first chapter, the introduction, the meaning of research is introduced as well as the analytical frame employed in the dissertation. The second chapter introduces the definition and development of firm pension, in which the pension system in the U.S. is given especially focus and a comparison between pension systems in China and other countries such as USA, German and Britain is provided. The third chapter, the literature review, discusses the economic literatures on pension in detail, which is divided into three parts: the motivation of employees for pension, the motivation of employers for pension and the impact of facts outside the relationship between employees and employers on the firm pension, all of which include the theoretical research and empirical research. In the fourth chapter, in combination with the analytical frame, the act model of the two parts in firm pension—employees and employers—is introduced. The fifth chapter analyses the optimal designation of firm pension when the characters of employee are the discount rate of future income and the bargaining power. The sixth chapter provides an extension of the model in the fifth chapter, in which the characters of firm, industry and the system background are translated into the character of employee. In doing so, the conclusion drew in the former chapter could be used with little cost and the structure of this dissertation is more compact. In the seventh chapter, according to the models in the former two chapters, some conclusion is drew, which is divided into two parts—for the firms and for the government. The last two parts are appendix and reference.On the base of such analysis structure, we get our innovative works and conclusions as fellows:Firstly, on the aspect of theoretical analysis, our main innovative works are: (1)modeling DB and DC pensions as which consist of the time requirement, wage before the time requirement satisfied, wage after the time requirement satisfied and the pension income, which expressed in a uniform (w₁, w₂, p,λ); (2)distinguishing employee with the discount rate of future income. Based on the formulation of firm pension raised above, we put forward a basic model to pursue the optimal design of firm pension and then the origin of the profit firm get; (3) when considering the specialized human capital, we add another attribute- the bargaining power- to the employee, and extend the basic model aiming at the optimal design of firm pension and the origin of the profit firm get at that time; (4) transforming the nature of firm, industry and the institutional background into the attributes of employee, through which we can make use of the results from the basic and the extended model, making more factors integrated into our model and our model being closer to the reality., and some related suggestion is raised accordingly.Secondly, on the aspect of relating theory to fact, as the newly development nature of the firm pension in China and thus the data hard to get and inadequate for econometric analysis, we just modernize our model according to the observed stylized facts and the empirical conclusions found in the US and the Europe, which make the models more plausible.Thirdly, on the aspect of conclusions, through the construction and modernization as above, we get the conclusions as fellows:(1)The relationship between the factors of firm pension and the attributes of employee: when keeping the same attraction to employee with lower regard to the future income, the wage before the time requirement satisfied could be lower, the time requirement harder and the pension income lower, vice versa; when employee with a higher bargaining power, for the same attraction, the wage before the time requirement should be higher, the time requirement softer and the pension income " higher, vice versa.(2)The relationship between the factors of firm pension: a upper adjustment in the wage before the time requirement satisfied has the same effects of a shorter adjustment in the time requirement or a upper adjustment in the pension income, vice versa; a upper adjustment in the time requirement is equal to a reduction in the wage before time requirement satisfied or a reduction in pension income, vice versa; a upper adjustment in pension income is equal to softening the time requirement or adding the wage before time requirement satisfied, vice versa.(3)In the basic model, with the imperfection in labor market and no specialized human capital, the profit firm get from the pension is the time-valued difference between firm and employee on the shortage of former wage to the marginal product value, multiplying the rate of employee accepting the pension; in the extended model with specialized human capital, when the wage is determined through the bargain between firm and employee, the profit firm get consists of: the first part, the present value of the specialized human capital during the whole working span, the second part, the time-valued difference between firm and employee on the shortage between former wage and external opportunity, as the existence of bargaining, part of the specialized human capital after the time requirement satisfied comes to employee, the third part is the time-valued difference between employee and firm on that quantity come to employee. (4)0n the aspect of suggestion for government, based on the model and institutional comparative analysis, we get the conclusion as fellows:â‘ give more freedom to firm when setting the firm pension plan, such as the freedom to set the factors of pension, and the freedom to choose the pension style;â‘¡government should make more efforts to construct the social basic guarantee system;â‘¢government should afford the taxation incentive to firm when constructing firm pension plan;â‘£government should constitute and perfect the law system related to pension plan;⑤government should constitute the pension insurance industry or promote its founding.The analyses of the optimal design of firm pension from the perspective of firm make a contribution to the consummation of the analyses of firm pension which lacks of a (?) optimal design research. The theoretical analyses in this dissertation are rigorous in that the combination of theory and practice is very compact, during which there are many revisions of the model according to the practice. Hope that the researches on this dissertation contribute a little to the foundation and consummation of the firm pension system in China.