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Redistributive effects of the US pension system among individuals with different life expectancy

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  • Sánchez-Romero, Miguel
  • Prskawetz, Alexia

Abstract

We investigate the differential impact that pension systems have on the labor supply and the accumulation of physical and human capital for individuals that differ by their learning ability and levels of life expectancy. Using a general equilibrium model populated by overlapping generations, in which all population groups interact through the pension system, the labor market, and the capital market, we show that the increasing gap in life expectancy by socioeconomic status makes the US pension system progressively more regressive and explains the increasing per capita income gap across ability groups.

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  • Sánchez-Romero, Miguel & Prskawetz, Alexia, 2017. "Redistributive effects of the US pension system among individuals with different life expectancy," The Journal of the Economics of Ageing, Elsevier, vol. 10(C), pages 51-74.
    • Handle: RePEc:eee:joecag:v:10:y:2017:i:c:p:51-74
    DOI: 10.1016/j.jeoa.2017.10.002
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    Cited by:

    1. Haan, Peter & Kemptner, Daniel & Lüthen, Holger, 2020. "The rising longevity gap by lifetime earnings – Distributional implications for the pension system," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).
    2. Andras Simonovits, 2018. "Designing pension benefits when longevities increase with wages," CERS-IE WORKING PAPERS 1804, Institute of Economics, Centre for Economic and Regional Studies.
    3. Graziella Caselli & Rosa Maria Lipsi, 2018. "Survival inequalities and redistribution in the Italian pension system," Vienna Yearbook of Population Research, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna, vol. 16(1), pages 083-110.
    4. Miguel Sanchez-Romero & Alexia Prskawetz, 2020. "The Impact of Reducing the Pension Generosity on Inequality and Schooling," De Economist, Springer, vol. 168(2), pages 279-304, June.
    5. Sanchez-Romero, Miguel & Lee, Ronald D. & Prskawetz, Alexia, 2020. "Redistributive effects of different pension systems when longevity varies by socioeconomic status," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).
    6. Simonovits, András, 2018. "Hogyan tervezzük a nyugdíjjáradék-függvényt, ha a halandóság a kereset csökkenő függvénye? [Designing pension-benefit schedules when longevities increase with wages]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 831-846.
    7. Volker Grossmann & Johannes Schünemann & Holger Strulik, 2021. "Fair Pension Policies with Occupation-Specific Aging," CESifo Working Paper Series 9180, CESifo.
    8. Sanchez-Romero, Miguel & Lee, Ron & Fürnkranz-Prskawetz, Alexia, 2019. "Redistributive effects of different pension structures when longevity varies by socioeconomic status in a general equilibrium setting," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203628, Verein für Socialpolitik / German Economic Association.
    9. Mark C. Kelly, 2022. "Growth and Welfare Implications of Mortality Differentials in Unfunded Social Security Systems," Public Finance Review, , vol. 50(2), pages 206-235, March.
    10. Devriendt, Willem & Heylen, Freddy & Jacobs, Arthur, 2023. "Coping with demographic change: macroeconomic performance and welfare inequality effects of public pension reform," Journal of Pension Economics and Finance, Cambridge University Press, vol. 22(3), pages 425-449, July.
    11. Frankovic, Ivan & Kuhn, Michael, 2019. "Access to health care, medical progress and the emergence of the longevity gap: A general equilibrium analysis," The Journal of the Economics of Ageing, Elsevier, vol. 14(C).

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    More about this item

    Keywords

    Human capital; Longevity; Inequality; Life cycle; Social security;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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