Generational Accounting in China and Pension Reform from The Perspective of Generational Accounting
Ren Ruoen Jiang Yunyun Xu Nannan Lin Li (School of Economics and Management,Beihang University)
The paper presents the first set of generational accounts for china and analyze pension reform in China from the view of generational accounting. Taking into account special situation in China, we extend the standard method in follow ways: firstly, not only do we distinguish male and female, but also urban and rural cohorts in each generation. Secondly, we have to consider the change of coverage scale, while doing projection of contribution and benefit of social security. Our findings suggest that there is a serious imbalance between urban and rural people. The generational accounts will become negative at age 50 and older for urban people. But for rural people the age is 85 and older. Our findings also show unless policy toward existing generations is substantially altered, future generations will face an excessively heavy fiscal burden. For reasonable growth and interest rate assumptions, the difference between 2002 newborns and those born after 2002 ranges from 66 to 102 percent. If we adopt retirement age extension plan, the situation will be improved greatly. The generational imbalance will decrease to 43 to 81 percent. If we don't reform the pension system of institutions and state organs, the generational imbalance will increase to 78 to 115 percent.