On the Design of Sustainable and Fair PAYG Pension Systems When Cohort Sizes Change
AbstractIn this paper, the author deals with the question how to make PAYG pension systems financially resistant to fluctuating fertility rates. The author presents two pension schemes that lead to a permanently balanced budget but differ in the mixture of changes in the contribution rates and replacement rates they require in order to achieve this result. After analyzing the variations in the central parameters (both over time and across generations) for each of the schemes he discusses which consequences they have with regard to intergenerational burden sharing and fairness. In particular, the author is interested in how a generation is affected by changes in the size of proceeding and succeeding cohorts. He introduces a proportionality measure(defined as the ratio of relative inputs to relative outputs) that can be used as an indicator to study this impact. The author shows that the schemes have quite different implications concerning how past and future cohorts influence the proportionality measure. Finally he discusses how suitable the formulas are to be implemented in either traditional PAYG or in notional defined contribution (NDC) systems. JEL classification: H55; J1; J18; D630
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Oesterreichische Nationalbank (Austrian Central Bank) in its series Working Papers with number 95.
Length: 52 pages
Date of creation: 07 Feb 2005
Date of revision:
Postal: Oesterreichische Nationalbank, Economic Studies Division, c/o Beate Hofbauer-Berlakovich, POB 61, A-1011 Vienna, Austria
Find related papers by JEL classification:
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- J1 - Labor and Demographic Economics - - Demographic Economics
- J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Palmer, Edward, 2000. "The Swedish pension reform model : framework and issues," Social Protection Discussion Papers 23086, The World Bank.
- Lindbeck, Assar & Persson, Mats, 2002.
"The Gains from Pension Reform,"
712, Stockholm University, Institute for International Economic Studies.
- Robert Fenge & Martin Werding, 2003.
"Ageing and the Tax Implied in Public Pension Schemes: Simulations for Selected OECD Countries,"
CESifo Working Paper Series
841, CESifo Group Munich.
- Robert Fenge & Martin Werding, 2004. "Ageing and the tax implied in public pension schemes: simulations for selected OECD countries," Fiscal Studies, Institute for Fiscal Studies, vol. 25(2), pages 159-200, June.
- Friedrich Breyer, 2000. "Kapitaldeckungs- versus Umlageverfahren," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 1(4), pages 383-405, November.
- Mathias Kifman & Dirk Schindler, 2000. "Smoothing the Implicit Tax Rate in a Pay-as-you-go Pension System," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(3), pages 261-, May.
- Gordon, Roger H. & Varian, Hal R., 1988.
"Intergenerational risk sharing,"
Journal of Public Economics,
Elsevier, vol. 37(2), pages 185-202, November.
- John Geanakoplos & Olivia S. Mitchell & Stephen P. Zeldes, 1998.
"Social Security Money's Worth,"
Cowles Foundation Discussion Papers
1193, Cowles Foundation for Research in Economics, Yale University.
- John Geanakoplos & Olivia S. Mitchell & Stephen P. Zeldes, . "Social Security Money's Worth," Pension Research Council Working Papers 98-9, Wharton School Pension Research Council, University of Pennsylvania.
- John Geanakoplos & Olivia S. Mitchell & Stephen P. Zeldes, 2000. "Social Security Money's Worth," NBER Working Papers 6722, National Bureau of Economic Research, Inc.
- Geanakoplos, J. & Mitchell, O.S. & Zeldes, S.P., 1998. "Social Security Money's Worth," Papers 98-05, Columbia - Graduate School of Business.
- John Geanakoplos & Olivia S. Mitchell & Stephen P. Zeldes, . "Social Security Money's Worth," Pension Research Council Working Papers 97-20, Wharton School Pension Research Council, University of Pennsylvania.
- John Geanakoplos & Olivia S. Mitchell & Stephen P. Zeldes, 1998. "Social Security Money's Worth," Center for Financial Institutions Working Papers 98-27, Wharton School Center for Financial Institutions, University of Pennsylvania.
- repec:fth:iniesr:493 is not listed on IDEAS
- Toyotaka Sakai, 2003. "An axiomatic approach to intergenerational equity," Social Choice and Welfare, Springer, vol. 20(1), pages 167-176.
- James Konow, 2003. "Which Is the Fairest One of All? A Positive Analysis of Justice Theories," Journal of Economic Literature, American Economic Association, vol. 41(4), pages 1188-1239, December.
- Kenneth J. Arrow, . "Intergenerational Equity and the Rate of Discount in Long-Term Social Investment," Working Papers 97005, Stanford University, Department of Economics.
- Valdes-Prieto, Salvador, 2000. " The Financial Stability of Notional Account Pensions," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(3), pages 395-417, June.
- Carlos Vidal-Meli� & María del Carmen Boado-Penas, 2013. "Compiling the actuarial balance for pay-as-you-go pension systems. Is it better to use the hidden asset or the contribution asset?," Applied Economics, Taylor & Francis Journals, vol. 45(10), pages 1303-1320, April.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Markus Knell and Helmut Stix).
If references are entirely missing, you can add them using this form.