Simulation-based optimization of social security systems under uncertainty

Ermolieva, T. (2005). Simulation-based optimization of social security systems under uncertainty. European Journal of Operations Research 166 (3) 782-793. 10.1016/j.ejor.2004.03.044.

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This paper analyzes optimization-based approaches for a social security simulation model under demographic and economic uncertainties. The model is a compromise between a purely actuarial model and an overlapping generations general equilibrium model. It deals with production and consumption processes coevolving with “birth-and-death” processes of involved agents, e.g., region-specific households subdivided into single-year age groups, firms, governments, financial intermediaries, including pension systems and insurance. The production function of the model allows to track incomes expenditures, savings and dissavings of agents, as well as intergenerational and interregional transfers of wealth. The proposed approach combines the actuarial and the economic growth simulation models in a single stochastic optimization model which explicitly and realistically treats the underlying uncertainties with the goal to satisfy reasonable and secure consumption of agents. The design of optimal robust strategies is achieved by an adaptive simulation-based optimization procedure defined by non-smooth risk functions. Numerical solution is discussed.

Item Type: Article
Uncontrolled Keywords: Multiagent system; Social security; Risk management; Monte Carlo simulation; Stochastic optimization
Research Programs: Modeling Land-Use and Land-Cover Changes (LUC)
Risk, Modeling and Society (RMS)
Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 02:17
Last Modified: 27 Aug 2021 17:37

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