The Impacts of Aging and efficiency changes on pension and Macroeconomic variables using a Dynamic general equilibrium approach-Over Lapping Generation Model (OLG)

The process of economic development along with developments in the health fields and living standards improvements along with reduction in fertility has led to longer life expectancy and increase in the proportion of elderly in Iran Age structure changes to an older population will change type and quality of social needs and economic life cycles. Thus, aging phenomenon impacts peruses in terms of macroeconomic variables and social security system circumstance are significant. For this purpose a general equilibrium overlapping generations model known as Auerbach-kotlikoff (A-K) model consists four sections including households, firms, government and social security were used. The simulation results indicate that a decrease in population growth rate, lead to an increase in savings for old labors with higher productivity and it is overwhelmingly greater than young labors savings with low productivity. Therefore they have a higher labor supply in comparison with low productivity labors. In contrary, older labors devoted longer terms for work whereas youth have more labor supply. Indeed results show that people have gained assets during their economic activities and spend their wealth and their savings in the first period of retirement and a sudden drop in consumption in the following ages of retirement is visible.