Research On Determination For Moderate Levels Of Pension Replacement Rate

Pension replacement rate, a concept for measuring the security level of pension,is the ratio of retirees’ pension to employees’ wage. It rate is a key factor thatgovernments must be taken into account in the design of old-age insurance system. Indifferent country, the criteria and methods that determine the moderate levels ofpension replacement rate are different. How to determine the reasonable level ofpension replacement rate, these questions need to answered urgently.The paper investigates five respects from the process of the research and itsmethods. First, the author selects the influencing factors of pension replacement rateusing the methods of mathematical, and summarizes it’s system modules. Secondly,theoretically analyses the pair wise interaction of the all system modules, and builds abalanced and stable system-frame. Thirdly, with the application of structural equationmodel, builds theoretical models of pension replacement rate, and determines thevariables of factors in the conceptual model and their relationships. Fourthly, based onthe theoretical model, calculates and determines the moderate levels of pensionreplacement rate, combined with the theory of elasticity in economics. Finally,calculates the other key parameters of the old-age insurance system, according to themoderate levels of pension replacement rate.Theoretical model of pension replacement rate includes seven system modulesreflected by eleven observable variables, six direct effects, seven indirect effects, andthree overall effects. Among the research, the author uses macro-level panel data totest the goodness-of-fit of theoretical hypothesis model and actual observable datawith the method of GLS and mixed structural equation model, and finally get apreferable result.Pension replacement rate determined is a relatively stable value. When thefee-contributing years is between35-40, the wage growth rate between5-11%, theinterest rate between3-6%, the moderate levels of pension replacement rate would be39-56%.There are two points with new ideas in the paper. Firstly, establishes a theoreticalmodel of pension replacement rate using structural equation model. Secondly, thepaper applies economical elasticity into study of pension replacement rate, anddetermines the moderate level of pension replacement rate by investigating pensionreplacement rate’s sensitivity to its key factors.