Pension System Sustainability: Towards a Multidimensional Reform INCLUSIVE GROWTH FOR TRANSIONIAL MENA COUNTRIES MEEA 14 th ANNUAL CONFERENCE March 23-25,

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Presentation transcript:

Pension System Sustainability: Towards a Multidimensional Reform INCLUSIVE GROWTH FOR TRANSIONIAL MENA COUNTRIES MEEA 14 th ANNUAL CONFERENCE March 23-25, 2015 Hammamet, Tunisia

Increasing PAYG pension systems deficit Deficit

Unfavorable economic conditions High unemployment Low wage growth Inflation

Fertility Life expectancy Ageing Population Ageing Population

Computable General Equilibrium Model with Overlapping Generations Structure Intergenerational transfers Intergenerational transfers Changes in population structure

CGEM- OLG Computable general equilibrium model with overlapping generations: Auerbach and Kotlikoff (1987) Rutherford and Ramussen (2004)

Equilibrium Conditions State (Pension system ) Producers Households

Stages of the empirical analysis

Pension System Perspectives Under Unchanged Structure 0.7% % % 2030 Pension system deficit (% of GDP)

Unsustainable situation Reforms

Pension system sustainability in the long termMaintaining standards of living for pensionersAllow social coverage extension. Safeguarding acquired rights up to the date of the reform contributive capacity of employees and employers

Contribution rate Parametric reforms Remplacement rate Retirement age Complementary funded system

Contribution rate increase: reduce economic growth through the distortion on saving behavior. 36% in % in % in 2040 Pension level decrease: decline in the purchasing power of pensioners Retirement age increase : alleviate social contribution burden. Complementary pension funds: positive effects will take several years to be realized

Pension system equilibrium No negative effects No solution Simulation results

Parametric reforms Funded pillar Impasse The situation of the pension system is an undeniable urgency. A wide-ranging reform

Sustainability of Pensions: Towards a Multidimensional Reform

Policy conclusions