Pension Reforms in an Aging Society: A Fully Displayed Cohort Model

We fully display a cohort model of an economy with an aging population, taking into account complications such as varying household size, habit formation, inheritance and credit constraints. Filling the model with numbers, we are able to compare different pension reforms: 1. the base run, where the contribution rate bears the entire burden of adjustment; 2. reduced accrual rates, 3. replacing wage indexation with price indexation and 4. raised retirement age. Whether the policy changes are anticipated or not, private reactions widely differ.