OLG Model Analysis of Delayed Retirement and Social Pension Effects on Family-Based Elderly Care in China

Abstract

Driven by the traditional concept of “Raising Children to Ensure Old-age Security”, China’s elderly care system has long relied on a family-centered approach, with intergenerational financial transfers (IFTs) serving as a major source of income for the elderly. However, as China’s population ages, the government’s plan to implement delayed retirement from 2025, along with pension reforms, is expected to reshape family-based eldercare and intergenerational financial dynamics. This paper employs an Overlapping Generation (OLG) model, grounded in unified growth theory, which incorporates a delayed retirement policy under the constraint of pension fund balance to examine the impact of adjusting the pension contribution rates (PCRs) and raising retirement age (RA) on IFT rates. The research findings indicate a negative correlation between RA, PCR, and IFT. Both policies have the potential to alleviate the burden on family-based eldercare. The integrated implementation of these two policies not only creates room for a phased reduction in pension contribution rates but also enables the effective utilization of senior workers’ expertise and experience.

Keywords

• overlapping generations (OLG) model
• delayed retirement
• pension contribution rate (PCR)
• intergenerational financial transfer (IFT)