Impact of Government Debt Settlement on the Financial Sustainability of the Social Security Organization and Macroeconomic Variables in a DSGE Model

Articles in Press

Document Type : Research Article

Authors

1 Faculty of Economics, Tehran university, Tehran, Iran

2 Department of Economics, Faculty of Economics, University of Tehran

10.22084/aes.2025.30172.3741

Abstract

The Social Security Organization (SSO) is the only major pension fund in the country that receives the lowest level of governmental support. This distinctive position underscores the critical importance of carefully monitoring and managing the organization’s revenues and expenditures. At the same time, one of the most pressing challenges currently facing the national economy is the financial instability of pension funds, which is primarily reflected in persistent deficits of resources relative to expenditures. If left unresolved, this structural imbalance has the potential to significantly undermine overall economic stability and long-term growth.

This study aims to analyze the financial sustainability of the SSO using two complementary approaches. First, actuarial models are employed to assess how different levels of increased government contributions influence the organization’s financial position. Second, a dynamic stochastic general equilibrium (DSGE) framework is applied to evaluate the broader macroeconomic implications of such policy interventions. The outcomes of these two approaches are then systematically compared using official data covering the period from 2016 to 2022.

The results demonstrate that a positive government expenditure shock improves financial sustainability in the actuarial model, primarily through increased revenues that enhance the ratio of current assets to updated obligations. In contrast, the DSGE framework reveals that the updated value of organizational assets experiences only marginal improvements, largely due to labor market distortions such as reduced labor supply incentives and upward wage pressures. Nonetheless, the updated obligations of the fund decline, leading to an overall improvement in financial sustainability, albeit less pronounced than suggested by the actuarial estimates.

Overall, the findings highlight that government debt settlement with the SSO exerts a favorable impact on its financial sustainability, although the magnitude of this effect varies depending on the methodological framework applied.

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Journal of Applied Economics Studies in Iran

Articles in Press, Accepted Manuscript
Available Online from 09 September 2025

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