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Population Aging, Fiscal Sustainability and PAYG Pension Reform

Author

Listed:
  • Takaaki Morimoto

    (Graduate School of Economics, Osaka University)

  • Yuta Nakabo

    (Graduate School of Economics, Osaka University)

  • Ken Tabata

    (School of Economics, Kwansei Gakuin University)

Abstract

This paper examines how pay-as-you-go (PAYG) pension reform from a defined-benefit scheme to a defined-contribution scheme affects fiscal sustainability and economic growth in an overlapping generations model with endogenous growth. We show that in economies in which the old-age dependency ratio is high and the size of pension benefits under a defined-benefit scheme is large, such a pension reform mitigates the negative effect of population aging on fiscal sustainability and economic growth. However, we also show that this type of pension reform entails an intergenerational conflict of interest between current and future generations. Population aging might exacerbate the extent of this conflict.

Suggested Citation

  • Takaaki Morimoto & Yuta Nakabo & Ken Tabata, 2016. "Population Aging, Fiscal Sustainability and PAYG Pension Reform," Discussion Paper Series 140, School of Economics, Kwansei Gakuin University, revised Feb 2016.
  • Handle: RePEc:kgu:wpaper:140
    as

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    File URL: http://192.218.163.163/RePEc/pdf/kgdp140.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Population aging; PAYG pensions; Defined-benefit schemes; Definedcontribution schemes; Fiscal sustainability;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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