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Pension reform with migration and mobile capital: is a Pareto improvement possible?

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  • Igor Fedotenkov
  • Lex Meijdam

Abstract

This paper shows that in a two-country two-overlapping-generations model with migration, capital mobility and an immobile production factor (land), a locally welfare-improving pension reform at the cost of the neighboring country is possible if land plays a minor role in production. Furthermore, differences in the size of the PAYG pension schemes between the countries distort the international allocation of labour and capital. As a result, a Pareto-improving pension reform is possible if countries employ PAYG pension schemes of different size, provided that a federal government exists that redistributes benefits and losses of the reform both intergenerationally and internationally. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Igor Fedotenkov & Lex Meijdam, 2014. "Pension reform with migration and mobile capital: is a Pareto improvement possible?," International Economics and Economic Policy, Springer, vol. 11(3), pages 431-450, September.
    • Handle: RePEc:kap:iecepo:v:11:y:2014:i:3:p:431-450
    DOI: 10.1007/s10368-013-0259-2
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    Cited by:

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    More about this item

    Keywords

    Pension reform; Land; Migration; Welfare improvement; F22; F41; H55;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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