New Pension Economics

By Qin Zhongchun, Research Department of Rural Economy of DRC

Nov 1, 2014

Preface

Economics is a social science on the allocation of scarce resources. This book tries to discuss the issue of pension from the perspective of economics. Modern economics studies the nature of national wealth and the source of its growth. It has gradually evolved into a more in-depth and more widely-ranged theoretical framework encompassing Classical Economics, New Classical Economics, Development Economics and Institutional Economics. In modern economics, Institutional Economics boasts significant progress through evolving from an incomplete and immature theory to an integrated and comprehensive doctrine. Institutional Economics, with an original analytical approach, takes institution as a kind of transactional contract. By defining the definition and protection of property rights as well as the nature of being equal, mutually beneficial and cost-saving in transaction and the management of and checks on unpredictability as essential subjects, Institutional Economics believes that the building of an effective organization is the key to economic growth. It offers an excellent theoretical tool to interpret the actual social and economic phenomena and to address social and economic problems.

The core of economics is putting forward questions, breaking the questions down and addressing them. Simple economics is to study the relationships among several variables while the most complex one is to help people to address social and actual issues. One of the basic approaches in economics is to explore the relationships between certain variables while keeping some under control. This is a scientific, yet restrictive approach, as control of variables means the introduction of assumption, which is either not consistent with the real world or is but one scenario among all complexities of the world. Another approach in economics is to try to produce abstract general rules based on known facts, draw up a basic framework and put in all variables to explain general issues. In fact, many opinions seem reasonable when viewed separately, but they will become contradicted when observed under a macro aggregate perspective. That is because there are different underlying assumptions behind all these opinions, which renders all the aggregate comparison and crosschecking invalid. In order to address social and actual problems, we need to seek internal uniformity and reasonable differences between separate entities, and that is why we need the so-called top-level design. We have to connect all variables in accordance with their inner logics of uniformity. Therefore, the general framework of economics is most important.

Contents

Introduction: Reflections and Innovation-Based Theoretical Framework of New Pension Economics

Chapter One: The Proposing of the Question

Section One: Inspirations from a Story about Bird Hunting

Section Two: The Security Paradox in the Mainstream Design of Pension System

Section Three: Theoretical Imperfections in Present Pension Economics

Section Four: Architecture of New Pension Economics

Chapter Two: Conceptions, Definitions and Approaches

Section One: Basic Conceptions

Section Two: Basic Definitions

Section Three: Basic Approaches

Chapter Three: Basic Pension Mechanism Model

Section One: Model of Basic Pension Insurance Mechanism: Based on Acquisition with Labor or Due to Labor

Section Two: Model of Basic Pension Benefits Mechanism: Based on Acquisition without Labor or Acquisition Due to Poverty

Chapter Four: Basic Pension Insurance System

Section One: Targeted Participants: People with Incomes and General Social Members

Section Two: Role of the Government: Policy Regulator, Transactional Service Provider, Supervisor and Sponsor with Proportionate Fund

Section Three: Fund Balance: Fund-raising by Participants and Distribution among Participants

Section Four: Operation Mechanism: Accumulation and Distribution and Insurance Dividend

Section Five: Pension Input: Combine Mandatory Measures and Incentives

Section Six: Pension Remuneration: Resilient Security and Double Growth

Section Seven: Characteristics of the System: An Agreement of Limited Basic Investment and Limited Basic Returns

Chapter Five: Pension Contribution

Section One: Traditional Definition of Pension Contribution and Defects

Section Two: New Interpretation for Pension Contribution and Relevant Determinants

Section Three: Reasonable Mechanism for Pension Contribution

Chapter Six: Impacts from Demographic Factor

Section One: The Unpredictability of Individual Life Expectancy

Section Two: Structure of Social Average Life Cycle

Section Three: Types of Average Life Expectancy

Section Four: Definition of Remaining Average Life Expectancy after Retirement

Section Five: Forecast on China’s Future Population Development

Section Six: Estimation of Population with Minimum Annual Contribution

Section Seven: How to Address Aging Population

Chapter Seven: Investment Dividends and Policy-based Dividends

Section One: The Raising and Utilization of Investment Dividends

Section Two: The Raising and Utilization of Policy-backed Dividends

Chapter Eight: Dividends Resulting from Economic Transformation

Section One: Substance and Nature of Dividends Resulting from Economic Transformation

Section Two: Generation Mechanism of Dividends Resulting from Economic Transformation——Theoretical Analysis

Section Three: Generation Mechanism of Dividends Resulting from Economic Transformation——Empirical Analysis

Section Four: The Raising, Sharing and Transferring of Dividends Resulting from Economic Transformation

Section Five: Theoretical Significance and Policy Implications of Dividends Resulting from Economic Transformation

Chapter Nine: Development of Pension Insurance Remuneration

Section One: Traditional Interpretation of Pension Remuneration and Relevant Defects

Section Two: New Interpretation of Pension Remuneration and its Determinants

Section Three: The Approach towards Introducing Coefficient Benchmark System

Section Four: The Channels of Introducing Coefficient Benchmark System

Chapter Ten: Insurance Remuneration Adjustment

Section One: Traditional Approach toward and Theoretical Innovation of Insurance Remuneration Adjustment

Section Two: The Mechanism of Pension Insurance Remuneration Adjustment in Basic Pension Insurance Provided by US Government

Section Three: The Mechanism of Pension Insurance Remuneration Adjustment in Basic Insurance for Chinese Urban Workers

Section Four: A Comparison of Pension Insurance Remuneration Adjustment Mechanism between China and US Section Five: Reform on the Mechanism of Pension Insurance for Chinese Urban Workers

Chapter Eleven: New Interpretation for Pay-As-You-Go System and Fund Accumulation System

Section One: Traditional Interpretation for Pay-as-you-go System and Fund Accumulation System

Section Two: Perspectives and Defects of the Traditional Interpretation

Section Three: Perspectives and Basic Approach of the New Interpretation

Section Four: Pension Fund under Different Social Backgrounds

Section Five: Pension Replacement Ratio under Different Social Backgrounds

Section Six: New Interpretations for Pay-As-You-Go System and Fund Accumulation System

Section Seven: New Relationship between Pay-As-You-Go System and Fund Accumulation System

Chapter Twelve: From Pay-As-You-Go System to Fund Accumulation System

Section One: The Significance and Feasibility of the Switch of System

Section Two: Traditional Practice of the Switch of System

Section Three: Major Problems and Defects

Section Four: Reasonable Channels and New Mechanism of the Switch of System

Chapter Thirteen: New Interpretation for Social Pool

Section One: Traditional Interpretation and Defects of Social Pool

Section Two: New Interpretation and Major Nature of Social Pool

Chapter Fourteen: From the Combination of Social Pool Account with Individual Account to the Combination of Social Pool Pay with Individual Investment

Section One: The Combination of Social Pool Account with Individual Account: Combination of Segments

Section Two: The Combination of Social Pool Pay with Individual Investment: Combination of Chains

Section Three: A Comparison between the Combination of Social Pool Account with Individual Account and the Combination of Social Pool Pay with Individual Investment

Section Four: Building New Models of the Combination of Social Pool Pay with Individual Investment

Chapter Fifteen: Basic Pension Relief System

Section One: Targeted Group: Non-incomers and Aged with Low Income

Section Two: Role of the Government: Fund-raiser, Rule-setter, Transactional Service Provider and Supervisor

Section Three: Fund Balance: External Fund-raising and Distribution among Participants

Section Four: Operation Mechanism: National Relief with Subsistence Allowance as Supplement

Section Five: Pension Input: Public Finance and Transfer Payment

Section Six: Pension Remuneration: Subsistence Allowance and Margin Subsidy

Section Seven: Characteristics of the System: An Agreement of Limited Financial Input and Limited Security Standard

Chapter Sixteen: The Connection of Basic Pension System

Section One: To Cover Everyone in Need: Mechanism Innovation

Section Two: Principle of Connection: From End to End

Section Three: Design of the System: Complementary Compatibility

Chapter Seventeen: Management of Basic Pension Fund

Section One: Substance of Basic Pension Fund

Section Two: Property Management of Pension Fund

Section Three: Connecting Past, Present and Future

Section Four: The Introduction of Long-term Balance Sheet

Section Five: Removing the Gap of Pension Fund

Section Six: Management of the Investment of Pension Fund

Section Seven: Information Management of Pension Fund

Section Eight: Management Mode of Pension Fund

Chapter Eighteen: Management of the Basic Pension Fund Agreement

Section One: Transactional Agreement, Unpredictability and Opportunism

Section Two: Responsibilities and Risks of the Participants

Section Three: Responsibilities and Risks of the Insurers

Section Four: Promises, Mandatory Items and Securities

Afterword

References