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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 in the long-run delivers 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 the remaining pay-as-you-go component: despite the greater role that redistribution 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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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3773.

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Date of creation: Feb 2003
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Handle: RePEc:cpr:ceprdp:3773

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

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References

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  1. 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.
  2. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
  3. 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.
  4. Peter Diamond, 2000. "Social Security Reform," 'Angelo Costa' Lectures Serie, SIPI Spa, issue Lect. I.
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  6. Sinn, Hans-Werner & Uebelmesser, Silke, 2003. "Pensions and the path to gerontocracy in Germany," Munich Reprints in Economics 19563, University of Munich, Department of Economics.
  7. Martin Feldstein, 2005. "Rethinking Social Insurance," NBER Working Papers 11250, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. 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.
  2. Christophe Hachon, 2008. "Redistribution, Pension Systems and Capital Accumulation," Financial Theory and Practice, Institute of Public Finance, vol. 32(3), pages 339-368.
  3. 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.
  4. Estrada, Fernando, 2010. "Devouring the Leviathan: fiscal policy and public expenditure in Colombia," MPRA Paper 21981, University Library of Munich, Germany.
  5. repec:hal:wpaper:halshs-00279167 is not listed on IDEAS
  6. 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.
  7. Estrada, Fernando, 2012. "Estado y política pública en Colombia
    [State and Public Policy in Colombia]
    ," MPRA Paper 42380, University Library of Munich, Germany.
  8. Kuhle, Wolfgang, 2012. "Dynamic efficiency and the two-part golden rule with heterogeneous agents," Journal of Macroeconomics, Elsevier, vol. 34(4), pages 992-1006.
  9. repec:hal:wpaper:halshs-00285040 is not listed on IDEAS
  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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