The Impact of Pension Reform in Government Institutions and Public Service Units on the Demand for Commercial Pension Insurance: From the Perspective of Economic Uncertainty

Utilizing a Dynamic Stochastic General Equilibrium (DSGE) model, this paper examines the effects of pension reform in government agencies and public institutions on the demand for commercial endowment insurance. The research indicates that after the reform, the demand for commercial endowment insurance among employees diminishes in the steady state, yet consumption remains stable, suggesting a substitution effect with basic endowment insurance and occupational annuity. In reaction to unforeseen temporary technological shocks, the demand for commercial endowment insurance fluctuates less initially and then more after the reform, compared to the pre-reform period. This occurs because basic endowment insurance and occupational annuity are compulsory, with contributions being a fixed percentage of income, whereas commercial endowment insurance is optional, with employees making contribution decisions based on utility maximization. The varying intensities of their reactions to technological shocks result in different fluctuations in the demand for commercial endowment insurance before and after the reform. Counterfactual simulations indicate that a higher employer contribution rate (or individual contribution rate) for basic endowment insurance correlates with an increased (or decreased) demand for commercial endowment insurance in the steady state. In addition, the higher the employer contribution rate of occupational annuity, the lower the demand for steady-state commercial pension insurance; the higher the individual contribution rate, the lower the demand for steady-state commercial pension insurance. Moreover, minor differences in contribution rates have a limited impact on the volatility of commercial pension demand under technology shocks, thereby leaving room for gradual reform. This paper offers substantial insights into understanding the interplay between various types of endowment insurance and enhancing the pension financial system.