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Sharing high growth across generations:pensions and demographic transition in China

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Author Info

  • Zheng Song

    (Department of Economics, University of Chicago Booth, Chicago, Illinois, United States)

  • Kjetil Storesletten

    (Federal Reserve Bank of Minneapolis, Minnesota, United States)

  • Yikai Wang

    (Department of Economics, University of Zurich, Switzerland)

  • Fabrizio Zilibotti

    ()
    (CEPRA, Institute of Economics, Universita' della Svizzera Italiana)

Abstract

Intergenerational inequality and old-age poverty are salient isuues in contemporary China. China's aging population threatens the fiscal sustainability of its pension system, a key vehicle for intergenerational redistribution. We analyze the positive and normative effects of alternative pension reforms, using a dynamic general equilibrium model that incorporates population dynamics and productivity growth. Although a reform is necessary, delaying its implementation implies large welfare gains for the (poorer) current generations, imposing only small costs on (richer) future generations. In contrast, a fully funded reform harms current generations, with small gains to future generations. High wage growth is key for these results.

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Bibliographic Info

Paper provided by USI Università della Svizzera italiana in its series CEPRA working paper with number 1203.

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Length: 50 pages
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:lug:wcepra:1203

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Web page: https://www.bul.sbu.usi.ch

Related research

Keywords: China; credit market imperfections; demographic transition; economic growth; fully funded system; inequality; intergenerational redistribution; labor supply; migration; pensions; poverty; rural-urban reallocation; total fertility rate; wage growth;

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  1. Barr, Nicholas & Diamond, Peter, 2008. "Reforming Pensions: Principles and Policy Choices," OUP Catalogue, Oxford University Press, number 9780195311303.
  2. Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2002. "Distance to Frontier, Selection, and Economic Growth," NBER Working Papers 9066, National Bureau of Economic Research, Inc.
  3. Greg Kaplan & Sam Schulhofer-Wohl, 2012. "Understanding the Long-Run Decline in Interstate Migration," NBER Working Papers 18507, National Bureau of Economic Research, Inc.
  4. Martin Feldstein, 1998. "Social Security Pension Reform in China," NBER Working Papers 6794, National Bureau of Economic Research, Inc.
  5. Chang-Tai Hsieh & Peter Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," Working Papers 09-04, Center for Economic Studies, U.S. Census Bureau.
  6. William Lavely, 2001. "First Impressions from the 2000 Census of China," Population and Development Review, The Population Council, Inc., vol. 27(4), pages 755-769.
  7. Zhang, Junsen & Zhao, Yaohui & Park, Albert & Song, Xiaoqing, 2005. "Economic returns to schooling in urban China, 1988 to 2001," Journal of Comparative Economics, Elsevier, vol. 33(4), pages 730-752, December.
  8. Marcos Chamon & Kai Liu & Eswar S. Prasad, 2010. "Income Uncertainty and Household Savings in China," NBER Working Papers 16565, National Bureau of Economic Research, Inc.
  9. Felix Salditt & Peter Whiteford & Willem Adema, 2007. "Pension Reform in China: Progress and Prospects," OECD Social, Employment and Migration Working Papers 53, OECD Publishing.
  10. Feldstein, Martin, 1999. "Social Security Pension Reform in China," Scholarly Articles 2794835, Harvard University Department of Economics.
  11. Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, vol. 57(4), pages 779-813, July.
  12. Barro, Robert J. & Lee, Jong Wha, 2013. "A new data set of educational attainment in the world, 1950–2010," Journal of Development Economics, Elsevier, vol. 104(C), pages 184-198.
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Cited by:
  1. Steef Baeten & Tom Van Ourti & Eddy Van Doorslaer, 2012. "Rising Inequalities in Income and Health in China: Who is left behind?," Tinbergen Institute Discussion Papers 12-091/V, Tinbergen Institute.
  2. Ge, Suqin & Yang, Dennis T. & Zhang, Junsen, 2012. "Population Policies, Demographic Structural Changes, and the Chinese Household Saving Puzzle," IZA Discussion Papers 7026, Institute for the Study of Labor (IZA).

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