Population Aging and Simulation of Transition to Optimal Pension Policy in Iran's Economy

This paper seeks to determine the optimal pension policy according to the aging of the Iran’s population, by calculating the optimal replacement rate and simulating transition to this rate. For this purpose, an OverLapping Generations Model, with five main parts of population, household, production, government and pension system, was calibrated. Demographic data related to the next hundred years were used based on the United Nations report and the relevant variables were predicted. In first step, the optimal value of replacement rate for the year 1430 was calculated. The results show that the replacement rate will be optimal in the range of 15 percent. Also, the results show that by adjusting the replacement rate to the optimal rate, the amount of contribution rate will also decrease significantly. In the next step It was assumed that the government adjust the replacement rate, and of course contribution rate, of the pension system to the optimal amount during a forty-five-year plan through a fiscal policy that will be implemented in 1400. The results showed that with transferring to the optimal policy, the capital stock, labor supply, production and welfare will increase.