Computable Stochastic Equilibrium Models and Their Use in Pension- and Ageing Research

Abstract

Inter- and intra-generational risk-sharing, Portfolio choice over life cycle, C68, D81, D91, H55,

Fiscal effects of the Norwegian pension reform – A micro–macro assessment

“…Beetsma, Bettendorf and Broer (2003) and Bovenberg and Knaap (2005) use CGE models with overlapping generations (OLG) in the tradition pioneered by Auerbach and Kotlikoff (1987) to assess budget and economic consequences of stylized pension reforms in the Netherlands. Fehr (2009) surveys the use of stochastic CGE models in analyses of population ageing and pension reforms. Relatively recent topics in this literature include, the transition between steady states, uncertainty and risk sharing, social efficiency effects, as well as inter-and intra-generational income distribution effects.…”

Reforming retirement age in DB and DC pension systems in an aging OLG economy with heterogenous agents

“…In the literature that builds on the overlapping generation framework, it is customary to conceptualize the welfare implications of policy reform as a change in utility observed across cohorts between the baseline and the reform scenario, following among others Breyer (1989) and Feldstein (1995). Indeed, there has been an extensive body of literature applying this approach to analyzing the welfare implications of both pension systems and their reforms (see Fehr 2009;Lindbeck and Persson 2003 for an overview). The literature devoted to the topic of retirement age can be broadly divided into two types of approaches: the concept of an optimal retirement age and a welfare analysis for variety of the pension system reforms.…”

Small assumptions (can) have a large bearing: evaluating pension system reforms with OLG models

“…The solution proposed by Fehr (2000) is mathematically elegant and fairly simple (the implicit tax can be iteratively computed in the model, which implies that both the Gauss-Seidel and value function/policy iteration algorithms can easily implement it), but has been surprisingly often left out, see Fehr (2009) for discussion. In this paper we treat a specification in which agents see no link between the pension contributions and pension benefits as baseline, regardless of the pension system.…”

“…However, moving from a deterministic to a stochastic setting involves much more variations that one single assumption, which is why we restrain from comparing stochastic to deterministic model setups. The role of the stochastic (microeconomic) income shocks has been discussed at length by De Nardi et al (1999), Fehr (2009), Nishiyama and Smetters (2005).…”