welfare effects of adjusting the replacement rate of Iran's pension system based on the overlapping generations model

November 6, 2022Financial Economics فصلنامه اقتصاد مالیOpen Access

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Key Points

This research aims to calculate the optimal replacement rate for Iran's pension system and study its welfare effects on society.
Developed an overlapping generations model for the Iranian economy.
Compared current pension system with optimal replacement rate and full reserve pension system.
Assessed heterogeneous productivity among individuals in the analysis.
Optimal replacement rate calculated at twenty percent; premium deductions reduced to eighteen percent.
Adjusting to the optimal rate increases overall welfare but benefits high-productivity individuals more, causing welfare loss for low-productivity individuals.
Full reserve pension system shows better macroeconomic indicators (capital stock, labor supply) but still offers lower welfare than the optimal replacement rate scenario.

Examines optimal replacement rate impact on welfare in Iran, suggesting necessary compensatory policies for low-productivity households.

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Rezazadeh et al. (2022) studied this question.

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