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Risk Sharing and Efficiency Implications of Progressive Pension Arrangements

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  • Hans Fehr
  • Christian Habermann

Abstract

This paper aims to quantify the welfare effects of progressive pension arrangements in Germany. Starting from a purely contribution-related benefit system, we introduce basic allowances for contributions and a flat benefit fraction. Since our overlapping-generations model takes into account variable labor supply, borrowing constraints as well as stochastic income risk, we can compare the labor supply, the liquidity and the insurance effects of the policy reform. Our simulations indicate that it would be optimal to introduce a flat benefit share of 50 percent and a basic allowance that amounts to 30 percent of average income. Such a reform would yield an aggregate efficiency gain of 3.3 percent of resources. Copyright � The editors of the "Scandinavian Journal of Economics" 2008 .

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 110 (2008)
Issue (Month): 2 (06)
Pages: 419-443

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Handle: RePEc:bla:scandj:v:110:y:2008:i:2:p:419-443

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References

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Citations

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Cited by:
  1. R. Beetsma & A. L. Bovenberg, 2006. "Pension systems, intergenerational risk sharing and inflation," European Economy - Economic Papers 257, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  2. Hans Fehr & Johannes Uhde, 2013. "On the optimal design of pension systems," Empirica, Springer, vol. 40(3), pages 457-482, August.
  3. Hans Fehr & Sabine Jokisch & Laurence J. Kotlikoff, 2005. "Will China Eat Our Lunch or Take us to Dinner? - Simulating the Transition Paths of the U.S., Eu, Japan and China," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-151, Boston University - Department of Economics.
  4. Simonovits, András, 2011. "Rászorultsági vagy alapnyugdíj? Nyugdíjjóváírás?
    [Means-tested or flat pension? Pension credit]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 301-313.
  5. Daniel Harenberg & Alexander Ludwig, 2014. "Social Security and the Interactions Between Aggregate and Idiosyncratic Risk," Working Paper Series in Economics 71, University of Cologne, Department of Economics.
  6. Simonovits, András, 2013. "Egyszerű paternalista transzfermodellek családja
    [A family of simple paternalistic transfer models]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 402-430.
  7. Nick Draper & André Nibbelink & Johannes Uhde, 2013. "An Assessment of Alternatives for the Dutch First Pension Pillar, The Design of Pension Schemes," CPB Discussion Paper 259, CPB Netherlands Bureau for Economic Policy Analysis.
  8. Hans Fehr & Fabian Kindermann, 2012. "Optimal Taxation with Current and Future Cohorts," CESifo Working Paper Series 3973, CESifo Group Munich.
  9. Fehr, Hans & Kallweit, Manuel & Kindermann, Fabian, 2013. "Should pensions be progressive?," European Economic Review, Elsevier, vol. 63(C), pages 94-116.
  10. Hans Fehr & Sabine Jokisch & Laurence J. Kotlikoff, 2005. "Will China Eat Our Lunch or Take Us Out to Dinner? Simulating the Transition Paths of the U.S., EU, Japan, and China," NBER Working Papers 11668, National Bureau of Economic Research, Inc.
  11. Kallweit, Manuel & Fehr, Hans & Kindermann, Fabian, 2011. "Should pensions be progressive? Yes, at least in Germany!," Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 48708, Verein für Socialpolitik / German Economic Association.
  12. Christian Habermann & Fabian Kindermann, 2007. "Multidimensional Spline Interpolation: Theory and Applications," Computational Economics, Society for Computational Economics, vol. 30(2), pages 153-169, September.
  13. Fehr, Hans & Jokisch, Sabine & Kallweit, Manuel & Kindermann, Fabian & Kotlikoff, Laurence J., 2013. "Generational Policy and Aging in Closed and Open Dynamic General Equilibrium Models," Handbook of Computable General Equilibrium Modeling, Elsevier.
  14. Hans Fehr, 2009. "Computable Stochastic Equilibrium Models and Their Use in Pension- and Ageing Research," De Economist, Springer, vol. 157(4), pages 359-416, December.
  15. Fehr, Hans & Uhde, Johannes, 2012. "Optimal Pension Design in General Equlibrium," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62024, Verein für Socialpolitik / German Economic Association.

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