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Capital-skill complementarity and the redistributive effects of Social Security Reform

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  • Casarico, Alessandra
  • Devillanova, Carlo

Abstract

This paper analyses the general equilibrium implications of reforming pay-as-you-go pension systems in an economy with heterogeneous agents, human capital investment and capital-skill complementarity. It shows that increasing funding, by raising savings, delivers in the long run higher physical and human capital and therefore higher output, but also higher across-group wage and income inequality. It also shows that the general equilibrium effects induced by this reform affect groups' sizes in a way that the higher across-group inequality generated by more funding goes with a larger share of the population against redistribution.

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File URL: http://www.sciencedirect.com/science/article/B6V76-4P8GWV6-3/1/3f41e7d1ed7f64f9adaaef439054d216
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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 92 (2008)
Issue (Month): 3-4 (April)
Pages: 672-683

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Handle: RePEc:eee:pubeco:v:92:y:2008:i:3-4:p:672-683

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Web page: http://www.elsevier.com/locate/inca/505578

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References

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  1. CASAMATTA, Georges & CREMER , Helmuth & PESTIEAU, Pierre, . "The political economy of social security," CORE Discussion Papers RP -1475, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Juan C. Conesa & Dirk Krueger, 1999. "Social Security Reform with Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 757-795, October.
  3. Sinn, Hans-Werner & Uebelmesser, Silke, 2003. "Pensions and the path to gerontocracy in Germany," European Journal of Political Economy, Elsevier, vol. 19(1), pages 153-158, March.
  4. Claudia Goldin & Lawrence F. Katz, 1996. "The Origins of Technology-Skill Complementarity," NBER Working Papers 5657, National Bureau of Economic Research, Inc.
  5. Per Krusell & Lee E. Ohanian & Jose-Victor Rios-Rull & Giovanni L. Violante, 1997. "Capital-skill complementarity and inequality: a macroeconomic analysis," Staff Report 239, Federal Reserve Bank of Minneapolis.
  6. Diamond, Peter A., 2002. "Social Security Reform," OUP Catalogue, Oxford University Press, number 9780199247899.
  7. de la Croix,David & Michel,Philippe, 2002. "A Theory of Economic Growth," Cambridge Books, Cambridge University Press, number 9780521806428, October.
  8. Coronado Julia Lynn, 2002. "The Effects of Social Security Privatization on Household Saving: Evidence from Chile," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 1(1), pages 1-24, August.
  9. Hugett, M. & Ventura, G., 1997. "On the Distributional Effects of Social Security Reform," UWO Department of Economics Working Papers 9710, University of Western Ontario, Department of Economics.
  10. Martin S. Feldstein & Jeffrey B. Liebman, 2002. "The Distributional Effects of an Investment-Based Social Security System," NBER Chapters, in: The Distributional Aspects of Social Security and Social Security Reform, pages 263-326 National Bureau of Economic Research, Inc.
  11. Laurence J. Kotlikoff & Kent Smetters & Jan Walliser, 2002. "Distributional Effects in a General Equilibrium Analysis of Social Security," NBER Chapters, in: The Distributional Aspects of Social Security and Social Security Reform, pages 327-370 National Bureau of Economic Research, Inc.
  12. Griliches, Zvi, 1969. "Capital-Skill Complementarity," The Review of Economics and Statistics, MIT Press, vol. 51(4), pages 465-68, November.
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Citations

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Cited by:
  1. Kuhle, Wolfgang, 2012. "Dynamic efficiency and the two-part golden rule with heterogeneous agents," Journal of Macroeconomics, Elsevier, vol. 34(4), pages 992-1006.
  2. Estrada, Fernando, 2012. "Estado y política pública en Colombia
    [State and Public Policy in Colombia]
    ," MPRA Paper 42380, University Library of Munich, Germany.
  3. repec:hal:wpaper:halshs-00285040 is not listed on IDEAS
  4. Christophe Hachon, 2008. "Redistribution, Pension Systems and Capital Accumulation," Financial Theory and Practice, Institute of Public Finance, vol. 32(3), pages 339-368.
  5. Fernando, Estrada & Jorge Ivan, Gonzalez & Alberto, Castrillon & Mauricio, Perez, 2010. "Problemas fiscales y redistributivos en Colombia
    [Redistributive fiscal problems in Colombia]
    ," MPRA Paper 20518, University Library of Munich, Germany.
  6. Estrada, Fernando, 2010. "Devouring the Leviathan: fiscal policy and public expenditure in Colombia," MPRA Paper 21981, University Library of Munich, Germany.
  7. Wolfgang Kuhle, 2012. "The Dynamics of Utility in the Neoclassical OLG Model," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2012_22, Max Planck Institute for Research on Collective Goods.
  8. repec:hal:wpaper:halshs-00279167 is not listed on IDEAS
  9. Fernando, Estrada, 2013. "Estado y política pública en Colombia: Un balance desde la teoría política
    [State and public policy in Colombia]
    ," MPRA Paper 45223, University Library of Munich, Germany.
  10. Christophe Hachon, 2010. "Éducation et progressivité des systèmes de retraite. Quand les inégalités face à la mort comptent," Revue économique, Presses de Sciences-Po, vol. 0(4), pages 751-769.

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