Iranian Journal of Economic Research

Income Redistribution in IRAN’s Social Security Fund and the Effect of Inflation on it

Authors

Ali Mohammad Kimiagari 1
Reza Manuchehri Rad 2

1 Ph.D, Associate Professor, Industrial Engineering Department, Amirkabir University of Technology

2 MA, Student of Socio-Economic Systems Engineering, Industrial Engineering Department, Amirkabir University of Technology

Abstract
One of the most fundamental outputs of social security systems is the redistribution mechanism. With moving from FUND to PAYG position and vice versa, the system shows intergenerational redistribuation and within-cohort redistribuation effects, depends on financial organization. According to the law, the mechanism considered for social security system in IRAN is FUND. Thus, we expect within-cohort redistribuation. This research tests this important note with evaluating insured individual accounts. The resualts show, in different target population deciles, internal rate of return (IRR) is 47 to 85% with average 53% and benefit – cost ratio (B/C) is 2.6 to 10.3 with average 3.7. This indicates that the necessary investment rate is 53%, while with current optimistic assessment, this rate is 30% for long-term, which shows intergenerational redistribuation. The effect inflation increase on redistribution test indicates current and future generation losses and also intensifying intergenerational redistribuation

Keywords

Intergenerational Redistribuation
Intergenerational Within-cohort
Inflation
Social Security
Iran
Pension Fund

  • Receive Date 27 April 2016
  • First Publish Date 27 April 2016

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