A Migrant Flow Pension Model for Small Open Economies

Abstract

Securing pensions relates to careful planning, which in turn requires adequate predictions. Among the many factors in an increasingly globalized world that impede adequate predictions is the factor of migrant flows. To date, most pension models do not consider migrant worker cohort flows. This has critical implications, particularly for pension planning in small open economies with a high inflow and outflow of migrant workers. To close that gap, the article provides a highly innovative model that considers not only population aging but also the cohort of cross-border workers and their entitlement to a partial pension in the future. It is doing that through forecasting pension cohorts annually for the native population, cross-border workers, and net migrations. Based on demographic variables, the article develops an enabling framework for policymakers. This framework outlines a set of scenarios for the long-term sustainability of pension systems in small open economies. The framework also offers important insights for larger economies with high levels of migrant flows.

TOPICS: Pension funds, emerging markets, retirement