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The Gains from Pension Reform

  • Lindbeck, Assar

    ()

    (Institute for International Economic Studies, Stockholm University)

  • Persson, Mats

    ()

    (Institute for International Economic Studies, Stockholm University)

We characterize pension systems along three dimensions: 1) actuarial vs. non-actuarial, 2) funded vs. pay-as-you-go, 3) defined-contribution vs. defined-benefit. Increasing the degree of actuarial fairness, by strengthening the linkage between contributions and benefits, reduces labor market distortions and may increase welfare in a Pareto-efficiency sense. Increasing the degree of funding implies mainly a redistribution of income among generations, although a partial shift to funding also provides better risk-return combinations for individuals. Shifting from defined-benefit to defined-contribution schemes (with fixed contribution rates) shifts the income risk from workers and taxpayers to pensioners.

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Paper provided by Stockholm University, Institute for International Economic Studies in its series Seminar Papers with number 712.

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Length: 68 pages
Date of creation: 16 May 2002
Date of revision:
Handle: RePEc:hhs:iiessp:0712
Contact details of provider: Postal: Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden
Phone: +46-8-162000
Fax: +46-8-161443
Web page: http://www.iies.su.se/
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