IDEAS home Printed from https://ideas.repec.org/a/wly/canjec/v52y2019i3p1289-1320.html
   My bibliography  Save this article

Distributional effects of social security reforms: The case of France

Author

Listed:
  • Raquel Fonseca
  • Thepthida Sopraseuth

Abstract

This paper assesses the impact of two social security reforms using a calibrated, dynamic life cycle model. It quantifies the long‐run distributional impact of two sets of reforms in France: (1) the 2013 reform of Prime Minister Ayrault, which modified the parameters of a defined benefit (DB) plan, and (2) a hypothetical reform that changes the system to a notional defined contribution (NDC) plan, similar to that in Italy. First, on aggregate welfare, the Ayrault reform and the hypothetical switch to NDC yield contrasting results. The Ayrault reform improves aggregate welfare, which is not the case for the NDC reform. Welfare comparisons are made with respect to the “benchmark economy,” where increases in life expectancy occur and are dealt with only through a higher contribution rate. Second, both reforms yield unequal distributions of welfare changes, with low‐skill workers on the losing end. Under the Ayrault reform, low‐skill workers delay retirement by two years, to age 62. Under NDC reform, pensions for low‐skill workers fall substantially as inequalities during the work life translate directly into inequalities in pensions. The switch to an NDC scheme leads to a more unequal society in terms of asset and welfare distribution. Les effets redistributifs des réformes de retraite: le cas de la France. Cet article utilise un modèle de cycle de vie dynamique calibré pour quantifier l’impact distributif à long terme de deux réformes du système de retraite en France: (1) la réforme Ayrault de 2013, qui modifie les paramètres d’un système à prestations déterminées (PD); (2) un passage hypothétique à un système de comptes notionnels à cotisation déterminé (NDC), comme en Italie. Tout d’abord, les deux réformes donnent lieu à des résultats opposés en terme de bien‐être aggrégé. La réforme Ayrault améliore le bien‐être total, ce qui n’est pas de la réforme NDC. Les comparaisons de bien‐être sont effectuées par rapport à une économie de référence caractérisée par une hausse de l’espérance de vie et des taux de cotisation. De plus, les réformes donnent lieu à des distributions inégales du bien‐être, avec les travaileurs peu qualifiés dans la queue de distribution. En effet, la réforme Ayrault les contraint à travailler deux années supplémentaires, jusqu’à l’âge de 62 ans. Le système NDC conduit à une réduction marquée des pensions de retraite, en particulier pour les travailleurs peu qualifiés, les inégalités au cours de la vie active se répercutant sur le montant des pensions. Le passage au système NDC se traduirait par une hausse des inégalités de patrimoine financier et de bien‐être.

Suggested Citation

  • Raquel Fonseca & Thepthida Sopraseuth, 2019. "Distributional effects of social security reforms: The case of France," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 52(3), pages 1289-1320, August.
  • Handle: RePEc:wly:canjec:v:52:y:2019:i:3:p:1289-1320
    DOI: 10.1111/caje.12399
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/caje.12399
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Arrondel, Luc & Laferrere, Anne, 2001. "Taxation and wealth transmission in France," Journal of Public Economics, Elsevier, vol. 79(1), pages 3-33, January.
    2. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393, Elsevier.
    3. Arrondel, Luc, 2002. "Risk management and wealth accumulation behavior in France," Economics Letters, Elsevier, vol. 74(2), pages 187-194, January.
    4. Luisa Fuster, 1999. "Is Altruism Important for Understanding the Long-Run Effects of Social Security?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 616-637, July.
    5. John Rust & Christopher Phelan, 1997. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Econometrica, Econometric Society, vol. 65(4), pages 781-832, July.
    6. Blau, David M, 1987. "A Time-Series Analysis of Self-employment in the United State," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 445-467, June.
    7. Hansen, Gary D & Imrohoroglu, Ayse, 1992. "The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 118-142, February.
    8. Pierre-Yves Hénin & Thomas Weitzenblum, 2005. "Welfare effects of alternative pension reforms : Assessing the transition costs for French socio-occupational groups," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00326600, HAL.
    9. HENIN, P. Y. & WEITZENBLUM, Th., 2005. "Welfare effects of alternative pension reforms: Assessing the transition costs for French socio-occupational groups," Journal of Pension Economics and Finance, Cambridge University Press, vol. 4(3), pages 249-271, November.
    10. Juan C. Conesa & Dirk Krueger, 1999. "Social Security Reform with Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 757-795, October.
    11. Luisa Fuster & Ayse Imrohoroglu & Selahattin Imrohoroglu, 2003. "A welfare analysis of social security in a dynastic framework," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1247-1274, November.
    12. Ana Castaneda & Javier Diaz-Gimenez & Jose-Victor Rios-Rull, 2003. "Accounting for the U.S. Earnings and Wealth Inequality," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 818-857, August.
    13. Barton H. Hamilton, 2000. "Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self-Employment," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 604-631, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:canjec:v:52:y:2019:i:3:p:1289-1320. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley Content Delivery). General contact details of provider: https://doi.org/10.1111/(ISSN)1540-5982 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.