APPENDIX 1: Note on Generational Accounting Model
Cardarelli, Roberto, and Nicola Sartor, 2000, “Generational Accounts for Italy,” in Fiscal Sustainability, ed. by Banca d’Italia (Perugia, Italy: SADIBA).
Cardarelli, Roberto, James Sefton, and Laurence Kotlikoff, 2000, “Generational Accounting in the UK,” Economic Journal, Vol. 110 (November), pp. 547–74.
Chawla, Mukesh, 2005, “Why Should We Worry About the Health Sector in the Czech Republic?,” (unpublished; Washington: World Bank).
European Observatory of Health Care Systems, 2000, Health Care Systems in Transition: Czech Republic (Copenhagen: Secretariat of the European Observatory on Health Care Systems).
Ministry of Labor and Social Affairs, 2004b, Actuarial Report on Social Insurance (Prague: Ministry of Labor and Social Affairs).
Prepared by Anita Tuladhar. The author would like to thank Roberto Cardarelli, Lawrence Kotlikoff, James Sefton, and Natalia Tamirisa for their kind assistance with the program, and seminar participants at the Czech National Bank and European Department for useful suggestions.
As part of the Convergence Program (Ministry of Finance, 2004), fiscal reform measures have been identified and partially implemented. The authorities estimate that if these reform measures are fully implemented, in order to achieve the target debt of 60 percent by 2050, an additional adjustment of 5 percent of GDP will be needed. Under a more pessimistic scenario, if the reforms are not implemented, a 10 percent adjustment will be required.
The budget covers for the “state insured” comprising unemployed, pensioners, dependents up to the age of 26, students, women on maternity leave, military, prisoners and people on social welfare. They constitute almost 53 percent of the population.
Income tax plus employee and employer contributions in the Czech Republic was 43.8 percent of labor costs in 2003, compared to the OECD average of 36.5 percent.
Demographic projections by Charles University, which are used by the Pension Reform Committee, are based on the assumption of life expectancy increasing from 72.8 years to 82 for men and 79.2 years to 86.7 for women, fertility rates increasing from 1.23 births to 1.64, and net migration rate increasing from 22.8 persons (per thousand) to 25.4, between 2005 and 2050.
See Chapter II for a more detailed description of aging trends and cross-country comparisons.