A Social Security Forecasting and Simulation Model

This paper presents and validates a multiregional neoclassical economic- demographic growth model developed by the IIASA Social Security Reform Project. This model is intended to study linkages between population age distribution, the macroeconomy, the nature of pension arrangements, the intergenerational distribution of income and wealth, and international capital flows. In this paper, we concentrate on the model in single-region form, showing that: (i) reasonable exogenous assumptions give rise to a reasonable long-run model solution; (ii) when exogenous assumptions or model parameters are changed, the model performs sensibly on a baseline-vs.-alternative basis; and (iii) model projection results are reasonably robust to selection of demographic scenario and exogenous assumptions regarding household saving and labor supply; they are sensitive, however, to the selection of the parameters of the core production function.

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