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Pension Reform and Economic Performance under Imperfect Capital Markets


  • Casarico, Alessandra


The author considers an overlapping generations model where heterogeneous agents take decisions on consumption and investment in education under the assumption of imperfect capital markets. She studies how the introduction of a pay-as-you-go and of a fully funded pension scheme affects output and lifetime opportunities and then analyzes the impact of a pension reform. The standard neutrality result for fully funded pension schemes does not hold in this framework. The author establishes the conditions under which a fully funded scheme is associated with a higher investment in human capital. She shows that the transition path may involve poverty traps.

Suggested Citation

  • Casarico, Alessandra, 1998. "Pension Reform and Economic Performance under Imperfect Capital Markets," Economic Journal, Royal Economic Society, vol. 108(447), pages 344-362, March.
  • Handle: RePEc:ecj:econjl:v:108:y:1998:i:447:p:344-62

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    References listed on IDEAS

    1. Martin Feldstein, 1995. "Would Privatizing Social Security Raise Economic Welfare?," NBER Working Papers 5281, National Bureau of Economic Research, Inc.
    2. Homburg, Stefan, 1990. "The Efficiency of Unfunded Pension Schemes," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 640-647.
    3. Atkinson, Anthony B., 1995. "The Welfare State and Economic Performance," National Tax Journal, National Tax Association, vol. 48(2), pages 171-98, June.
    4. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
    5. Atkinson,Anthony Barnes, 1996. "Incomes and the Welfare State," Cambridge Books, Cambridge University Press, number 9780521557962, March.
    6. Brunner, Johann K., 1993. "Redistribution and the efficiency of the pay-as-you-go pension system," Discussion Papers, Series I 265, University of Konstanz, Department of Economics.
    7. Atkinson, Anthony B., 1995. "The Welfare State and Economic Performance," National Tax Journal, National Tax Association, vol. 48(2), pages 171-198, June.
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    Cited by:

    1. Fehr, Hans, 1999. "Welfare Effects of Dynamic Tax Reforms," Beiträge zur Finanzwissenschaft, Mohr Siebeck, Tübingen, edition 1, volume 5, number urn:isbn:9783161470165.
    2. Pemberton, James, 1999. "Social Security: National Policies with International Implications," Economic Journal, Royal Economic Society, vol. 109(457), pages 492-508, July.
    3. Julio López Díaz & Zenón J. Ridruejo, 2003. "Pensiones, crecimiento y envejecimiento de la población," Investigaciones Economicas, Fundación SEPI, vol. 27(2), pages 343-367, May.
    4. Casarico, Alessandra & Devillanova, Carlo, 2008. "Capital-skill complementarity and the redistributive effects of Social Security Reform," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 672-683, April.
    5. Casarico Alessandra, 2001. "Pension systems in integrated capital markets," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 1(1), pages 1-19, November.
    6. Nils Hauenschild, 2000. "Pareto-Improving Transition from Pay-as-you-goto Fully Funded Social Security under Uncertain Incomes," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(1), pages 1-39, September.

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