Pension Reform in an OLG Model with Multiple Social Security Systems

Primarily due to financial sustainability problems, social security reforms have been on the policy agenda of both developed and developing countries for the last decade. Research literature on the subject tends to use overlapping generations (OLG) models with single representative household and presents reforms as shock to the constructed model. This study presents an OLG model with three separate social security institutions where the heterogeneity is through different benefit payments and contribution rates. Convergence across various institutions is enabled by a replacement ratio shock and model dynamics are discussed.