Labor market effects of pension reform : an overlapping generations general equilibrium model applied to Tunisia

Abstract EN

This paper develops an overlapping general equilibrium framework to capture the interactions among pension reform, labor market and inter-generational distribution issues in Tunisia.

The impact on the labor market is addressed at the aggregate level but also by distinguishing different age categories.

The three reform scenarios implemented to reduce the social security deficit consist in increasing social security contributions, reducing the replacement rate and postponing the retirement age.

The main result obtained is that increasing contribution rates is the worst solution in terms of welfare and unemployment, particularly for the youth.

The best option is postponing the retirement age.

Contrary to the traditional wisdom, it does not entail an increase of youth unemployment.

For the two scenarios where aggregate welfare increases, the middle-aged are those that benefit the most from the reforms.