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Social security, income inequality and growth

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  • LE GARREC, GILLES

Abstract

In most industrial countries, public pension systems redistribute from workers to retired people, not from high-income to low-income earners. They are close actuarial fairness. However, they are not all equivalent. In particular, some pension benefits are linked to full lifetime average earnings, while others are only linked to partial earnings history. In the latter case, we then show in this article that an actuarially fair pay-as-you-go pension system can both reduce lifetime income inequality and enhance economic growth. We also shed light on the dilemma between inequality and economic growth in retirement systems: greater progressivity results in less lifetime inequlity but also less growth.

Suggested Citation

  • Le Garrec, Gilles, 2012. "Social security, income inequality and growth," Journal of Pension Economics and Finance, Cambridge University Press, vol. 11(01), pages 53-70, January.
  • Handle: RePEc:cup:jpenef:v:11:y:2012:i:01:p:53-70_00
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    File URL: http://journals.cambridge.org/abstract_S1474747211000229
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    References listed on IDEAS

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    1. David Hauner, 2008. "Macroeconomic Effects of Pension Reform in Russia," IMF Working Papers 08/201, International Monetary Fund.
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    Cited by:

    1. Gilles Le Garrec, 2015. "Increased longevity and social security reform: questioning the optimality of individual accounts when education matters," Journal of Population Economics, Springer;European Society for Population Economics, pages 329-352.
    2. Buyse, Tim & Heylen, Freddy & Van De Kerckhove, Renaat, 2017. "Pension reform in an OLG model with heterogeneous abilities," Journal of Pension Economics and Finance, Cambridge University Press, pages 144-172.
    3. Tim Buyse & Freddy Heylen & Renaat Van de Kerckhove, 2013. "Pension reform, employment by age, and long-run growth," Journal of Population Economics, Springer;European Society for Population Economics, pages 769-809.
    4. Gilles Le Garrec, 2012. "Social security and growth in an aging economy : the case of acturial fairness," Sciences Po publications 2012-18, Sciences Po.
    5. Gilles Le Garrec & Stéphane Lhuissier, 2011. "Life expectancy, heavy work and the return to education: lessons for the social security reform," Working Papers hal-01069511, HAL.
    6. Renaat Van de Kerckhove & Freddy Heylen & Tim Buyse, 2011. "Pension reform, employment by age, and long-run growth in OECD countries," 2011 Meeting Papers 736, Society for Economic Dynamics.
    7. Wang, Lijian & Béland, Daniel & Zhang, Sifeng, 2014. "Pension fairness in China," China Economic Review, Elsevier, vol. 28(C), pages 25-36.
    8. Gilles Le Garrec, 2012. "Social security and growth in an aging economy : the case of acturial fairness," Working Papers hal-01070354, HAL.
    9. Tim Buyse & Freddy Heylen & Renaat Van de Kerckhove, 2013. "Pension reform, employment by age, and long-run growth," Journal of Population Economics, Springer;European Society for Population Economics, pages 769-809.
    10. Gilles Le Garrec & Stéphane Lhuissier, 2011. "Life expectancy, heavy work and return to education ; lessons for the social security reform," Documents de Travail de l'OFCE 2011-18, Observatoire Francais des Conjonctures Economiques (OFCE).

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