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Capital-skill Complementarity and the Redistributive Effects of Social Security Reform

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Author Info
Alessandra Casarico ()
Carlo Devillanova ()
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 delivers in the long run higher physical and human capital and therefore higher output, but also higher wage and income inequality. The latter affects preferences over the degree of redistribution of e remaining pay-as-you-go component: despite the greater role that edistribution could perform in the new steady state, we find a preference for lower redistribution for a larger group of the population.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1038.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_1038

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Related research
Keywords: capital-skill complementarity; inter and intragenerational redistribution; pay-as-you-go; fully funded;

Find related papers by JEL classification:
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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  1. Eswar Prasad, 1994. "The Canadian Labor Market - Developments, Prospects, and Policy," IMF Working Papers 94/97, International Monetary Fund.
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    Other versions:
  3. Peter Diamond, 1998. "The Economics of Social Security Reform," NBER Working Papers 6719, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. 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. [Downloadable!]
    Other versions:
  5. Griliches, Zvi, 1969. "Capital-Skill Complementarity," The Review of Economics and Statistics, MIT Press, vol. 51(4), pages 465-68, November. [Downloadable!] (restricted)
  6. Karnit Flug & Zvi Hercowitz, 2000. "Equipment Investment and the Relative Demand for Skilled Labor: International Evidence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(3), pages 461-485, July. [Downloadable!] (restricted)
    Other versions:
  7. Casamatta, Georges & Cremer, Helmuth & Pestieau, Pierre, 2000. "The Political Economy of Social Security," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  8. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March. [Downloadable!] (restricted)
    Other versions:
  9. 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. [Downloadable!] (restricted)
  10. Julia Lynn Coronado, 2002. "The Effects of Social Security Privatization on Household Saving: Evidence from Chile," The B.E. Journal of Economic Analysis & Policy, Berkeley Electronic Press, vol. 0(1). [Downloadable!]
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    • Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324 Elsevier. [Downloadable!] (restricted)
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  13. Peter Diamond, 2004. "Social Security," American Economic Review, American Economic Association, vol. 94(1), pages 1-24, March. [Downloadable!]
  14. Mark Huggett & Gustavo Ventura, 1999. "On the Distributional Effects of Social Security Reform," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 498-531, July. [Downloadable!] (restricted)
    Other versions:
  15. Jonathan Gruber & David A. Wise, 2002. "Different Approaches to Pension Reform from an Economic Point of View," NBER Chapters, in: Social Security Pension Reform in Europe, pages 49-84 National Bureau of Economic Research, Inc. [Downloadable!]
  16. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier. [Downloadable!] (restricted)
  17. Casarico, Alessandra, 1998. "Pension Reform and Economic Performance under Imperfect Capital Markets," Economic Journal, Royal Economic Society, vol. 108(447), pages 344-62, March. [Downloadable!] (restricted)
  18. 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. [Downloadable!] (restricted)
  19. Pierre Pestieau, 1999. "The Political Economy of Redistributive Social Security," IMF Working Papers 99/180, International Monetary Fund.
  20. Thomas Cooley & Jorge Soares, 1999. "Privatizing Social Security," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 731-755, July. [Downloadable!] (restricted)
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  22. Steven A. Sass & Robert K. Triest, 1997. "Social Security reform: links to saving, investment and growth," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, issue Jun. [Downloadable!]
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