The Impact Effect Of Aging Population On Pay-as-you-go System: The Analysis Of Four Solutions

The pay-as-you-go system has been impacted because of the aging population. The economists put forward some proposals such as the transition from the pay-as-you-go system to the funded system, decreasing the amount of pension and increasing the tax of pension.In this paper, I analyzed the influence on an individual and macroeconomy which exerted by the four proposals through economics models, empirical analysis and numerical simulation.There are four innovation points in this paper. First, I analyzed the influence on an individual and macroeconomy quantificationally which exerted by the four proposals. Second, I used three-times OLG model. In most papers which use OLG model, the authors used two-times model. However, two-times OLG model neglect the influence on an individual and macroeconomy which exerted by an individual's study period. So I divided an individual's life into study period, working period and retirement period. This method is in accord with the facts. Third, I analyzed an individual's optimal retirement age in China quantificationally with models. In most papers which analyzed China's optimal retirement age, the authors analyzed this problem qualitatively and cannot get accurate answer. However, I established a model about the maximization of an individual's utility and got accurate China's optimal retirement age. Fourth, I added the Earlyretirement institution to the model. Earlyretirement is a special institution in China, but there are not any papers which analyzed the influence on China's optimal retirement age quantificationally. However, I got accurate answers in this paper.In respect to this paper's content, there are four main respects. First, I analyzed that the funded system would lead to dynamic inefficiency and the pay-as-you-go system would eliminate dynamic inefficiency and produce equilibrium income. Second, I analyzed the influence on an individual's welfare exerted by decreasing pension. Third, I analyzed the influence on an individual's welfare and saving exerted by increasing the taxation of old-age pension insurance. Fourth, I analyzed an individual's optimal retirement age.I hope this paper can have guidance on the implementation of the four solutions.