Effect of changes in contribution rates on the financial sustainability of the social security organization and macroeconomic variables in a DSGE model

Subject Areas : Financial Economics

Ali Souri ^{1 *} , Homa Esfahanian ² , Mohammad Hosein Mardi ³

1 - Assistant Professor, Department of Economics, University of Tehran, Tehran, Iran(Corresponding Author). [e-mail]
2 - Assistant Professor, Department of Economics, University of Tehran, Tehran, Iran. Email: [e-mail]
3 - PhD Candidate in Economics (Econometrics/Finance), University of Tehran, Tehran, Iran. [e-mail]

Received: 2024-11-19 Accepted : 2025-01-11 Published : 2025-01-11

Keywords: Public Pension Funds, Financial Sustainability, Actuarial Calculations, DSGE Model, Contribution Rate JEL Classification: H55, G22, R13,

Abstract :

The Civil Service Pension Fund and the Armed Forces Pension Fund rely on government budgets for more than 85% of their funding. In contrast, the Social Security Organization is the only major pension fund in the country with the lowest share of government support. This highlights the necessity of paying close attention to the fund's revenues and expenditures. At the same time, one of the most challenging issues facing the country today is the financial instability of pension funds, which is manifesting as a deficit in their resources relative to expenditures. Without timely solutions, this issue could have significant repercussions on the overall economy. The present study aims to address this issue by first using actuarial models to evaluate how changes in parameters, such as the contribution rate, affect the financial sustainability of pension funds. It then assesses the financial sustainability of the Social Security Organization using a general equilibrium model, comparing the outputs of these two approaches. The findings reveal that, following an increase in the contribution rate and the introduction of shocks to this parameter, the actuarial model indicates an improvement in the financial sustainability of the Social Security Organization due to increased resources. However, the results from the DSGE model differ significantly.

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