The Economics of Pensions. Remarks on Growth, Distribution and Class Conflict
AbstractThis paper compares fully-funded (FF) and pay-as-you-go (paygo) pension plans in a Keynesian framework for an economy with overlapping generations and excess capacity. The model addresses both short/medium run equilibria and steady-states. Income distribution and class conflict, two crucial aspects of the political economy of pensions, become multidimensional. In a fully-funded economy class conflict between capitalists and labor gets diffused in the short-run by retirees' own interest to maintain a high profit share. In the long-run capitalists recognize that they can control their (net) share of profits by controlling employment and therefore the number of future retirees through capital accumulation. An extension of the model can show that fiscal policy is not always helpful in a fully-funded economy. A pay-as-you-go economy maintains a closer resemblance to the classical story of class conflict over income distribution. This is because workers and retirees have their interests aligned with the wage share. In this case fiscal policy through spending can be effective without creating a debt problem.
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Bibliographic InfoPaper provided by University of Utah, Department of Economics in its series Working Paper Series, Department of Economics, University of Utah with number 2012_02.
Length: 21 pages
Date of creation: 2012
Date of revision:
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social security; fully-funded; Keynesian OLG JEL Classification: E24; E12; G23; H55;
Find related papers by JEL classification:
- Key - Law and Economics - - - - -
- OLG - Economic Development, Technological Change, and Growth - - - - -
- JEL - Labor and Demographic Economics - - - - -
- Cla - Mathematical and Quantitative Methods - - - - -
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
This paper has been announced in the following NEP Reports:
- NEP-AGE-2012-02-27 (Economics of Ageing)
- NEP-ALL-2012-02-27 (All new papers)
- NEP-DGE-2012-02-27 (Dynamic General Equilibrium)
- NEP-HME-2012-02-27 (Heterodox Microeconomics)
- NEP-LAB-2012-02-27 (Labour Economics)
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.:
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SCEPA Working Papers
2000-15, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
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