Saving and pension reform in general equilibrium models

In this paper we study saving and pension reform in the context of general equilibrium models. We discuss some of the reasons for the existence of a social security system. We highlight the key features of the US data that a general equilibrium model of saving and social security should match: The life-cycle profiles of savings, consumption and hours worked, and the aggregate capital-output ratio and saving rate. We describe the structure of a general equilibrium model, and discuss how its parameters are estimated or calibrated from the data. We present the quantitative results from some policy experiments previously computed in the literature, first in the context of stationary demographics and then with an ageing population, and highlight the key policy prescriptions that we learn from these experiments. We conclude by providing some directions for future research.