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Social security benefit rules, growth and inequality

  • Docquier, Frederic
  • Paddison, Oliver

We examine the balanced growth effects of pension plans on the rate of growth and on income dispersion in a closed economy where individual decisions about education are the engine of growth. We distinguish between pay-as-you-go and fully funded pension systems and differentiate between three different benefit rules: a Beveridgean regime, a Bismarckian regime depending on one's entire earnings history and on one's partial earnings history. Our analysis shows that social security generally reduces the long-run growth rate and our inequality measure. Growth can only be stimulated under a fully funded scheme based on partial earnings history. © 2003 Elsevier Science Inc. All rights reserved.

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File URL: http://www.sciencedirect.com/science/article/pii/S0164-0704(03)00006-5
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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 25 (2003)
Issue (Month): 1 (March)
Pages: 47-71

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Handle: RePEc:eee:jmacro:v:25:y:2003:i:1:p:47-71
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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  8. DOCQUIER, Frédéric & MICHEL, Philippe, 1994. "Education Subsidies and Endogenous Growth : Implications of Demographic Shocks," CORE Discussion Papers 1994052, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Sen, Amartya, 1973. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198281931, December.
  10. Zhang, Jie, 1995. "Social security and endogenous growth," Journal of Public Economics, Elsevier, vol. 58(2), pages 185-213, October.
  11. Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-34, August.
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