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Redistribution, Pension Systems and Capital Accumulation

  • Christophe Hachon

    (Centre d’Economie de La Sorbonne, University Paris 1, Panthéon-Sorbonne)

In this paper we study the macroeconomic impact of a policy which changes the redistributive properties of an unfunded pension system. Using an overlapping generations model with a closed economy and heterogeneous agents, we show that a weaker link between contributions and benefits has an impact on the level of capital per capita if and only if there are inequalities in the length of life. Furthermore, this policy has positive implications for every economic agent if the system has a defined-benefit structure. The tax rate and inequalities decrease, whereas the wealth of each agent increases. However, with a defined-contribution pension system, this policy has a negative impact on every macroeconomic variable except on the wealth of the poorest agents.

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Article provided by Institute of Public Finance in its journal Financial Theory and Practice.

Volume (Year): 32 (2008)
Issue (Month): 3 ()
Pages: 339-368

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Handle: RePEc:ipf:finteo:v:32:y:2008:i:3:p:339-368
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  1. Alessandro, SOMMACAL, 2004. "Pension systems and intragenerational redistribution when labor supply is endogenous," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2004008, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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  11. Gilles Le Garrec, 2005. "Social security, inequality and growth," Documents de Travail de l'OFCE 2005-22, Observatoire Francais des Conjonctures Economiques (OFCE).
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  15. Bas Van Groezen & Lex Meijdam & Harrie A. A. Verbon, 2007. "Increased Pension Savings: Blessing or Curse? Social Security Reform in a Two-Sector Growth Model," Economica, London School of Economics and Political Science, vol. 74(296), pages 736-755, November.
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