Managing Pension Plan in an Aging Population - The Dynamic Profit-Share Pension Model

Koutronas, E., Goh, K. L., & Yew, S. Y. (2017). “Managing pension plan in an aging population: The dynamic profit-share pension model” International Journal of Management Studies, 23(2), 45-64.

20 Pages Posted: 14 Jun 2017  

Evangelos Koutronas

Social Security Research Centre

Siew-Yong Yew

University of Malaya (UM)

Kim-Leng Goh

University of Malaya

Date Written: november 14, 2016

Abstract

This study examined the profit-share pension model as a potential vehicle for generating capital accumulation and effecting a progressive redistribution of wealth. Taking the functions of the pension mechanism as the guiding principle, we attempted to incorporate a profit-share fund into a three pillar pension system, eliminating the need for full funding from public resources. The general equilibrium model, with each agent solving a specific optimization problem, in which, on top of the full set of first order conditions for each problem, constraint conditions are imposed. Consideration of the equilibrium conditions gave us a complete system which conceivably, allowed us to solve the equilibrium paths for endogenous variables. The use of simulation techniques allowed us to accommodate a flexible and behaviorally realistic setting to examine the model’s behavior over time and compare its level of consistency to that of the real existing systems. The use of sensitivity analysis additionally investigated the model’s behavior in the presence of macroeconomic shocks by making changes to the model variables and observing their effects. The findings show profit sharing has a positive impact on business and economic activity and also has a positive impact on pension activity.

Keywords: Profit-share pension, Crude Monte Carlo simulation, social security

JEL Classification: J20, C53, J32

Suggested Citation

Koutronas, Evangelos and Yew, Siew-Yong and Goh, Kim-Leng, Managing Pension Plan in an Aging Population - The Dynamic Profit-Share Pension Model (november 14, 2016). Koutronas, E., Goh, K. L., & Yew, S. Y. (2017). “Managing pension plan in an aging population: The dynamic profit-share pension model” International Journal of Management Studies, 23(2), 45-64.. Available at SSRN: https://ssrn.com/abstract=2985441

Evangelos Koutronas (Contact Author)

Social Security Research Centre ( email )

University of Malaya
Kuala Lumpur, Wilayah Persekutuan 50603
Malaysia

Siew-Yong Yew

University of Malaya (UM)

Kuala Lumpur, Wilayah Persekutuan 50603
University of Malaya (UM)
Kuala Lumpur, Wilayah Persekutuan 50603
Malaysia

Kim-Leng Goh

University of Malaya ( email )

University of Malaya
Kuala Lumpur, Wilayah Persekutuan 50603
Malaysia
603-79673608 (Phone)

HOME PAGE: http://umexpert.um.edu.my/papar_cv.php?id=AAAJxnAAQAAAF91AAq

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