Effect of Pension Replacement Rate on Private Savings:a Theoretical Model

In social elderly insurance system,Pension replacement rate is one of the key parameter.It not only determines the welfare of retiree and the balance of funds between income and expenditure,but also has an effect on private savings.While the economy of overlapping generations reaches the equilibrium of competition,there is a negative correlation between pension replacement rate with private savings,that is pension replacement rate is increasing, while private savings is reducing.Accordingly,pension replacement rate should be designed to appropriate level for keeping proper capital stocks.