Implicit Pension Debt, Transition Cost, Options, and Impact of China's Pension Reform : A Computable General Equilibrium Analysis

Wang, Yan ; Xu, Dianqing ; Wang, Zhi ; Zhai, Fan

World Bank, Washington, DC

关键词: ACCOUNTING SYSTEM;    ADMINISTRATIVE COSTS;    ADMINISTRATIVE SYSTEM;    ALLOCATION OF RESOURCES;    AUTHORITY;   

DOI  :  10.1596/1813-9450-2555
RP-ID  :  WPS2555

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

The main problems with China'spension system--the pension burdens of state enterprises andthe agency of the population--have deepened in recent years.Using a new computable general equilibrium model thatdifferentiates between three types of enterprise ownershipand 22 groups in the labor force, the authors estimate theeffects of pension reform in China, comparing variousoptions for financing the transition cost. They examine theimpact that various reform options would have on thesystem's sustainability, on overall economic growth,and on income distribution. The results are promising. Thecurrent pay-as-you-go system, with a notional individualaccount, remains unchanged in the first scenario examined.Simulations show this system to be unsustainable. Expandingcoverage under this system would improve financial viabilityin the short run but weaken it in the long run. Otherscenarios assume that the transition cost will be financedby various taxes and that a new, fully funded individualaccount will be established in 2001. The authors compare theimpact of a corporate tax, a value-added tax, a personalincome tax, and a consumption tax. They estimate the annualtransition cost to be about 0.6 percent of Gross DomesticProduct (GDP) between 2000 and 2010, declining to 0.3percent by 2050. Using a personal income tax to finance thetransition cost would best promote economic growth andreduce income inequality. Levying a social security tax andinjecting fiscal resources to finance the transition costswould help make the reformed public pillar sustainable. Tofinance a benefit of 20 percent of the average wage, acontribution rate of only 10 percent-12.5 percent would beenough to balance the basic pension pillar. Graduallyincreasing the retirement age would further reduce thecontribution rate.