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The Impact of Reducing the Pension Generosity on Inequality and Schooling

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  • Miguel Sanchez-Romero

    (TU Wien
    Univ. Vienna, IIASA, VID/ÖAW)

  • Alexia Prskawetz

    (TU Wien
    Univ. Vienna, IIASA, VID/ÖAW)

Abstract

We investigate the impact of a reduction in the pension replacement rate on the schooling choice and on inequality in an overlapping generations model in which individuals differ by their life expectancy and in their cost of attending schooling. Within our framework we illustrate that many pension systems are ex ante regressive due to the difference in life expectancy across skill groups. We then derive the level of progressivity that needs to be implemented to restore an equal treatment of the pension system across skill groups.

Suggested Citation

  • Miguel Sanchez-Romero & Alexia Prskawetz, 2020. "The Impact of Reducing the Pension Generosity on Inequality and Schooling," De Economist, Springer, vol. 168(2), pages 279-304, June.
    • Handle: RePEc:kap:decono:v:168:y:2020:i:2:d:10.1007_s10645-020-09359-w
    DOI: 10.1007/s10645-020-09359-w
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    Cited by:

    1. Ben J. Heijdra & Klaus Prettner, 2020. "Putting People Back into the Picture: Some Studies in Demographic Economics," De Economist, Springer, vol. 168(2), pages 147-152, June.
    2. Sanchez-Romero, Miguel & Schuster, Philip & Prskawetz, Alexia, 2021. "Redistributive effects of pension reforms: Who are the winners and losers?," ECON WPS - Working Papers in Economic Theory and Policy 06/2021, TU Wien, Institute of Statistics and Mathematical Methods in Economics, Economics Research Unit.

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    More about this item

    Keywords

    Human capital; Longevity; Inequality; Life cycle; Social security; Pension; Progressivity;
    All these keywords.

    JEL classification:

    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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