Investigating and Analyzing the Economic Effects of Population Aging on Iran's Social Security System

Document Type : Research Paper

Authors

1 PhD Candidate, Department of Economics, Faculty of Social Sciences and Economics, Alzahra University, Tehran, Iran

2 Associate Professor, Department of Economics, Faculty of Social Sciences and Economics, Alzahra University, Tehran, Iran

3 Assistant Professor, Department of Economics, Faculty of Economics, Kharazmi University, Tehran, Iran

Abstract

The purpose of this paper is to examine the macroeconomic effects of the current pension schemes in Iran's aging society on the country's economy. To achieve this, a dynamic general equilibrium model, specifically the overlapping generations model, has been utilized, along with time series data from national accounts spanning from 1971 to 2020. The implicit assumption in this study is that population aging impacts economic variables through the mechanism of consumption patterns. Consumption patterns differ between youth and old age, and as the consumption pattern changes across different generations, individuals' savings patterns will also change. Consequently, investment and interest rates will also be affected between the two generations. In this paper, two scenarios are analyzed: the scenario of no pension reforms and the scenario of pension reforms. The effects of these scenarios on macroeconomic variables such as changes in savings patterns (due to shifts in household consumption patterns throughout their lifetime), investment, interest rates, GDP per capita, and government health expenditures in the context of two social security systems—Pay-As-You-Go (PAYG) and Fully Funded (FF)—are examined. The results show that population aging, combined with the lack of structural reforms in pension schemes, will lead to a decrease in GDP per capita and national savings per capita. The second scenario indicates that implementing structural reforms will lead to a smaller decrease in GDP per capita and an increase in savings. Keywords: Population aging, retirement, social security, overlapping generations model.

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References

منابع
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Iranian Economic Development Analyses
Volume 10, Issue 2
October 2024

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