Aging Population, The Optimal Contribution Rate And The PAYG Pension System

In 2012, the rate of the population over 65 was 9.39%, still exceed the threshold of the aging population which is 7%, while the total fertility rate of the population is only 1.18, indicating that the aging population is the basic national conditions of the 21st century which must be faced, the situation of the aging population in China is still grim in current and in the future, and presented a huge challenge to the pension system. The personal part of pension account in China has been empty running since the reform in 1997. The problem could not be solved in short term, so the pension system is still supported by the pay-as-you-go part. So the study of the PAYG system is of great significance.Differs from previous papers, this paper takes the perspective of the entire economies, constructs a endogenous growth model, studies the path of how population aging affect the PAYG pension rate and the criterion of weather the PAYG system would trigger the payment crisis.Conclusion with:the ageing of population result in the decline of saving rate and then pull the pension contribution rate up, the PAYG system would not have a payment crisis in short term, and the pension contribution rate has the function of automatic stabilizers, in long term, ageing of population does not necessarily lead to PAYG payments crisis. The optimal contribution rate of China’s was estimated as 25.79%, while unit labor output multiplier change from 1.5 to 0.5, the optimal contribution rate change from 25% to 29%. Taking into account that our PAYG system’s actual contribution rate may be from 20% to 28%, the result is in line. In long term, only in the case of unit labor output fell sharply, the PAYG system occurs payments crisis.