This paper addresses the problem of intergenerational and intragenerational distribution in a pay-as-you-go pension system. While each generation pays the pensions of the preceding generation, they also bear the burden of raising the next. The burden of child care is unevenly distributed within a generation. Demographic change affects the distribution across generations. To resolve both distributional issues this paper proposes to apply the rights-egalitarian sharing rule. Under this rule individual claims are fully respected; all gains or losses are divided equally. It can be shown that a rights-egalitarian pension system implements full compensation for human capital investments in a long-run equilibrium.
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Article provided by Duncker & Humblot, Berlin in its journal Schmollers Jahrbuch.
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Find related papers by JEL classification: H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games