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Pension systems and intragenenerational redistribution when labor supply is endogenous

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  • Alessandro Sommacal

Abstract

In models with exogenous labor supply, a reallocation of funds from a wage-related pension to a basic pension affects inequality through changes in the pension paid, redistributing resources from the rich to the poor. We show that in a model with endogenous labor supply, another effect is present: indeed changes of the benefit formula have an impact on the labor/leisure choice. This effect goes in the opposite direction of the standard effect that is also present in models with exogenous labor supply and it could be quite relevant, also depending on the different assumptions on the working of the labor market. In particular, under specific assumptions on the utility and the production functions, inequality is unaffected by a reallocation of funds towards the basic pension. However this result changes if a minimum wage is introduced, since in this case inequality turns out to be reduced. Copyright 2006, Oxford University Press.

Suggested Citation

  • Alessandro Sommacal, 2006. "Pension systems and intragenenerational redistribution when labor supply is endogenous," Oxford Economic Papers, Oxford University Press, vol. 58(3), pages 379-406, July.
  • Handle: RePEc:oup:oxecpp:v:58:y:2006:i:3:p:379-406
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    Cited by:

    1. Gilles Le Garrec, 2015. "Increased longevity and social security reform: questioning the optimality of individual accounts when education matters," Journal of Population Economics, Springer;European Society for Population Economics, pages 329-352.
    2. Christophe Hachon, 2008. "Redistribution, Pension Systems and Capital Accumulation," Financial Theory and Practice, Institute of Public Finance, vol. 32(3), pages 339-368.
    3. Buyse, Tim & Heylen, Freddy & Van De Kerckhove, Renaat, 2017. "Pension reform in an OLG model with heterogeneous abilities," Journal of Pension Economics and Finance, Cambridge University Press, pages 144-172.
    4. Brecht Boone & Freddy Heylen, 2015. "Cross-country differences in unemployment: fiscal policy,unions and household preferences in general equilibrium," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 15/899, Ghent University, Faculty of Economics and Business Administration.
    5. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09hi6860cc6 is not listed on IDEAS
    6. Willem Devriendt & Freddy Heylen, 2017. "Macroeconomic Effects Of Demographic Change In An Olg Model For A Small Open Economy - The Case Of Belgium -," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 17/931, Ghent University, Faculty of Economics and Business Administration.
    7. Gilles Le Garrec & Stéphane Lhuissier, 2011. "Life expectancy, heavy work and the return to education: lessons for the social security reform," Working Papers hal-01069511, HAL.
    8. Cagri Seda Kumru & John Piggott, 2010. "Should Public Retirement Pensions Be Means-tested?," DEGIT Conference Papers c015_049, DEGIT, Dynamics, Economic Growth, and International Trade.
    9. Christophe Hachon, 2009. "Who Really Benefits from Pension Systems ? When Life Expectancy Matters," Revue d'économie politique, Dalloz, vol. 119(4), pages 613-632.
    10. Iñigo Iturbe-Ormaetxe & Guadalupe Valera, 2012. "Social security reform and the support for public education," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(2), pages 609-634, January.
    11. Laura Cavalli & Alessandro Bucciol & Paolo Pertile & Veronica Polin & Nicola Sartor & Alessandro Sommacal, 2012. "Modelling life-course decisions for the analysis of interpersonal and intrapersonal redistribution," Working Papers 25/2012, University of Verona, Department of Economics.
    12. Freddy Heylen & Renaat Van de Kerckhove, 2014. "Heterogeneous ability and the effects of fiscal policy on employment, income and welfare in general equilibrium," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 14/898, Ghent University, Faculty of Economics and Business Administration.
    13. Tim Buyse & Freddy Heylen & Renaat Van de Kerckhove, 2013. "Pension reform, employment by age, and long-run growth," Journal of Population Economics, Springer;European Society for Population Economics, pages 769-809.
    14. Gilles Le Garrec & Stéphane Lhuissier, 2011. "Life expectancy, heavy work and return to education ; lessons for the social security reform," Documents de Travail de l'OFCE 2011-18, Observatoire Francais des Conjonctures Economiques (OFCE).
    15. M. Kamrul Islam & Ulf-G. Gerdtham & Philip Clarke & Kristina Burström, 2010. "Does income-related health inequality change as the population ages? Evidence from Swedish panel data," Health Economics, John Wiley & Sons, Ltd., vol. 19(3), pages 334-349.
    16. Gilles Le Garrec, 2012. "Social security and growth in an aging economy : the case of acturial fairness," Sciences Po publications 2012-18, Sciences Po.
    17. Jan Bonenkamp, 2007. "Measuring lifetime redistribution in Dutch occupational pensions," CPB Discussion Paper 81, CPB Netherlands Bureau for Economic Policy Analysis.
    18. Jan Bonenkamp, 2009. "Measuring Lifetime Redistribution in Dutch Occupational Pensions," De Economist, Springer, vol. 157(1), pages 49-77, March.
    19. Gilles Le Garrec, 2012. "Social security and growth in an aging economy : the case of acturial fairness," Working Papers hal-01070354, HAL.
    20. Luciano Fanti, 2012. "Habits, aspirations and endogenous fertility," Discussion Papers 2012/142, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    21. Bonenkamp, J., 2013. "Risk, redistribution and retirement : The role of pension schemes," Other publications TiSEM 4706dcec-f01f-41f9-a76a-1, Tilburg University, School of Economics and Management.

    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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