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Capital-skill Complementarity and the Redistributive Effects of Social Security Reform

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  • Alessandra Casarico
  • Carlo Devillanova

Abstract

This paper analyses the general equilibrium implications of reforming pay-as-you-go pension systems in an economy with heterogeneous agents, human capital investment and capital-skill complementarity. It shows that increasing funding delivers in the long run higher physical and human capital and therefore higher output, but also higher wage and income inequality. The latter affects preferences over the degree of redistribution of e remaining pay-as-you-go component: despite the greater role that edistribution could perform in the new steady state, we find a preference for lower redistribution for a larger group of the population.

Suggested Citation

  • Alessandra Casarico & Carlo Devillanova, 2003. "Capital-skill Complementarity and the Redistributive Effects of Social Security Reform," CESifo Working Paper Series 1038, CESifo.
  • Handle: RePEc:ces:ceswps:_1038
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    Cited by:

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    2. Kuhle, Wolfgang, 2012. "Dynamic efficiency and the two-part golden rule with heterogeneous agents," Journal of Macroeconomics, Elsevier, vol. 34(4), pages 992-1006.
    3. Christophe Hachon, 2008. "Redistribution, Pension Systems and Capital Accumulation," Financial Theory and Practice, Institute of Public Finance, vol. 32(3), pages 339-368.
    4. Davoine, Thomas & Mankart, Jochen, 2017. "Changes in education, wage inequality and working hours over time," Discussion Papers 38/2017, Deutsche Bundesbank.
    5. Kuhle, Wolfgang, 2014. "The dynamics of utility in the neoclassical OLG model," Journal of Mathematical Economics, Elsevier, vol. 52(C), pages 81-86.
    6. Krieger, Tim & Meemann, Christine & Traub, Stefan, 2022. "Inequality, life expectancy, and the intragenerational redistribution puzzle: Some experimental evidence," Discussion Paper Series 2022-02, University of Freiburg, Wilfried Guth Endowed Chair for Constitutional Political Economy and Competition Policy.
    7. Fernando, Estrada & Jorge Ivan, Gonzalez & Alberto, Castrillon & Mauricio, Perez, 2010. "Problemas fiscales y redistributivos en Colombia [Redistributive fiscal problems in Colombia]," MPRA Paper 20518, University Library of Munich, Germany.
    8. Christophe Hachon, 2008. "Redistribution, Pension Systems and Capital Accumulation," Working Papers halshs-00279167, HAL.
    9. Chen, Hung-Ju, 2015. "Child allowances, educational subsidies and occupational choice," Journal of Macroeconomics, Elsevier, vol. 44(C), pages 327-342.
    10. Wolfgang Kuhle, 2012. "The Dynamics of Utility in the Neoclassical OLG Model," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2012_22, Max Planck Institute for Research on Collective Goods.
    11. Christophe Hachon, 2008. "Do Redistributive Pension Systems Increase Inequalities and Welfare?," Working Papers halshs-00285040, HAL.
    12. Estrada, Fernando, 2012. "Estado y política pública en Colombia [State and Public Policy in Colombia]," MPRA Paper 42380, University Library of Munich, Germany.
    13. Estrada, Fernando, 2010. "Devouring the Leviathan: fiscal policy and public expenditure in Colombia," MPRA Paper 21981, University Library of Munich, Germany.
    14. Fernando, Estrada, 2013. "Estado y política pública en Colombia: Un balance desde la teoría política [State and public policy in Colombia]," MPRA Paper 45223, University Library of Munich, Germany.

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    More about this item

    Keywords

    capital-skill complementarity; inter and intragenerational redistribution; pay-as-you-go; fully funded;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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