2.1.2 Models of Long-term Forecasting in the Pension System
Andrey Polbin
Project Leader
Project period
2020-2025
Context of Research Project within a Subject of Human Capital
Developed and many developing countries, including Russia, are experiencing pronounced population aging and declining fertility, which leads to a reduction in the ratio of people of working age to people of retirement age. At the same time, in some third world countries, rising life expectancy and high fertility combined with a decline in early mortality will lead to an increase in the labor force, which stimulates the inflow of international capital into these economies. In the long run, demographic trends are the most important sources of acceleration (or deceleration) of economic growth. Russia in this case will not avoid demographic changes in the long run either. Despite the pension reform already in place in Russia, population ageing and declining birth rates will increase pressure on the pension system, which could lead to reconsideration of the reform strategy over time.
The implementation of the research project Models of Long-term Forecasting in the Pension System will make it possible to develop tools for assessing the effects of alternative economic policy measures in the field of the pension system on the volume and structure of labor resources in the Russian Federation. That is, it will allow us to analyze the impact of economic policy on human potential in the context of its impact on the level of human capital available for production processes abroad due to the impact on the intensity of work by individuals and due to the impact on the participation of individuals in the workforce. It will make it possible to assess the influence of migration flows on the dynamics of key macroeconomic indicators of the Russian Federation
Project Aim
Developing approaches to pension system reform taking into account long-term demographic trends
Project Objectives:
- Reviewing domestic and foreign experience in modeling pension reforms
- Constructing long-term demographic scenarios reflecting the age structure of the population for Russia and other regions of the world
- Developing a general equilibrium model taking into account demographic factors, calibration of its parameters responsible for the fiscal and pension systems
- Analyzing the economic consequences of various types of pension reform in the Russian Federation
Key Findings
2020
The analysis of short-term and long-term consequences of alternative options for pension reform has been carried out. The program of the regular seminar Models of Long-term Forecasting in the Pension System has been developed
2021
A model of a small open economy with overlapping generations has been constructed for the Russian Federation to assess the macroeconomic effects of raising the retirement age. The specification of a model with non-absolute capital mobility in the medium term has been considered
2022
Estimates of the macroeconomic effects of a gradual increase in the retirement age in Russia by 5 years during 2019-2028 have been obtained based on a general equilibrium model with overlapping generations. It has been revealed that the reform leads to a decrease in consumption (up to 0.5%) in the short term, wages are 1.5% lower than in the baseline scenario, but after 2025 there is an increase in consumption, which in the long term will be 0.75% compared to the baseline scenario, which does not involve reform. The labor supply increases by 0.63% in the short term, and grows by 1.24% in the long term. The premise of the Russian economy as a small open economy with an export sector leads to a smoothing of the short-term effect of the pension reform: despite shrinking domestic demand and falling profits in the non-tradable sector, the short-term decline in GDP is quite limited due to the presence of the export sector, which can grow in conditions of declining wages and fixed prices on the world market for products. The reform made it possible to increase the stability of fiscal policy, reduce the budget deficit of the pension system immediately and long-term by 3 percentage points of GDP and postpone tax increases in the future.
Publications
Kotlikoff L.J., Polbin A.V., Zubarev A.V. Will the Paris Accord Accelerate Climate Change? // Economic policy. 2021. Vol. 16. No. 1. pp. 8-37
Conferences
Regular seminar Models of Long-term Forecasting in the Field of the Pension System Moscow, Russia, September 30, 2021) University) (RU) (Moscow, Russia, November 14, 2021)