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Sharing high growth across generations:pensions and demographic transition in China

Author

Listed:
  • Zheng Song

    (Department of Economics, University of Chicago Booth, Chicago, Illinois, United States)

  • Kjetil Storesletten

    (Federal Reserve Bank of Minneapolis, Minnesota, United States)

  • Yikai Wang

    (Department of Economics, University of Zurich, Switzerland)

  • Fabrizio Zilibotti

    () (CEPRA, Institute of Economics, Universita' della Svizzera Italiana)

Abstract

Intergenerational inequality and old-age poverty are salient isuues in contemporary China. China's aging population threatens the fiscal sustainability of its pension system, a key vehicle for intergenerational redistribution. We analyze the positive and normative effects of alternative pension reforms, using a dynamic general equilibrium model that incorporates population dynamics and productivity growth. Although a reform is necessary, delaying its implementation implies large welfare gains for the (poorer) current generations, imposing only small costs on (richer) future generations. In contrast, a fully funded reform harms current generations, with small gains to future generations. High wage growth is key for these results.

Suggested Citation

  • Zheng Song & Kjetil Storesletten & Yikai Wang & Fabrizio Zilibotti, 2012. "Sharing high growth across generations:pensions and demographic transition in China," CEPRA working paper 1203, USI Università della Svizzera italiana.
    • Handle: RePEc:lug:wcepra:1203
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    References listed on IDEAS

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    Cited by:

    1. Doepke, M. & Tertilt, M., 2016. "Families in Macroeconomics," Handbook of Macroeconomics, Elsevier.
    2. Kaiji Chen & Yi Wen, 2017. "The Great Housing Boom of China," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(2), pages 73-114, April.
    3. Du, Qingyuan & Wei, Shang-Jin, 2016. "A Darwinian perspective on “exchange rate undervaluation”," European Economic Review, Elsevier, vol. 83(C), pages 111-138.
    4. repec:pal:gpprii:v:44:y:2019:i:1:d:10.1057_s41288-018-0110-7 is not listed on IDEAS
    5. Oliwia Komada & Krzysztof Makarski & Joanna Tyrowicz, 2017. "Welfare effects of fiscal policy in reforming the pension system," GRAPE Working Papers 11, GRAPE Group for Research in Applied Economics.
    6. Abhijit Banerjee & Xin Meng & Tommaso Porzio & Nancy Qian, 2014. "Aggregate Fertility and Household Savings: A General Equilibrium Analysis using Micro Data," Working Papers id:5799, eSocialSciences.
    7. Baeten, Steef & Van Ourti, Tom & van Doorslaer, Eddy, 2013. "Rising inequalities in income and health in China: Who is left behind?," Journal of Health Economics, Elsevier, vol. 32(6), pages 1214-1229.
    8. Chadwick C. Curtis & Steven Lugauer & Nelson C. Mark, 2015. "Demographic Patterns and Household Saving in China," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(2), pages 58-94, April.
    9. repec:taf:applec:v:49:y:2017:i:7:p:702-721 is not listed on IDEAS
    10. Jane Golley & Rod Tyers & Yixiao Zhou, 2018. "Fertility and savings contractions in China: Long‐run global implications," The World Economy, Wiley Blackwell, vol. 41(11), pages 3194-3220, November.
    11. Anping Chen & Nicolaas Groenewold, 2017. "An increase in the retirement age in China: the regional economic effects," Applied Economics, Taylor & Francis Journals, vol. 49(7), pages 702-721, February.
    12. Charles Bean, 2016. "Living with Low for Long," Economic Journal, Royal Economic Society, vol. 0(592), pages 507-522, May.
    13. repec:eee:hapoch:v1_179 is not listed on IDEAS
    14. Chen, Qin & Song, Zheng, 2014. "Accounting for China's urbanization," China Economic Review, Elsevier, vol. 30(C), pages 485-494.
    15. Steven Lugauer & Jinlan Ni & Zhichao Yin, 2014. "Micro-Data Evidence on Family Size and Chinese Saving Rates," Working Papers 023, University of Notre Dame, Department of Economics, revised Jun 2014.
    16. Georges, Patrick & Seçkin, Aylin, 2016. "From pro-natalist rhetoric to population policies in Turkey? An OLG general equilibrium analysis," Economic Modelling, Elsevier, vol. 56(C), pages 79-93.
    17. Curtis, Chadwick C. & Lugauer, Steven & Mark, Nelson C., 2017. "Demographics and aggregate household saving in Japan, China, and India," Journal of Macroeconomics, Elsevier, vol. 51(C), pages 175-191.
    18. Andrew Mountford & Hillel Rapoport, 2016. "Migration Policy, African Population Growth and Global Inequality," The World Economy, Wiley Blackwell, vol. 39(4), pages 543-556, April.
    19. Ge, Suqin & Yang, Dennis Tao & Zhang, Junsen, 2018. "Population policies, demographic structural changes, and the Chinese household saving puzzle," European Economic Review, Elsevier, vol. 101(C), pages 181-209.
    20. Xue, Jianpo & Yip, Chong K., 2017. "One-child policy in China : A unified growth analysis," BOFIT Discussion Papers 22/2017, Bank of Finland, Institute for Economies in Transition.
    21. Qing Zhao & Zhen Li & Taichang Chen, 2016. "The Impact of Public Pension on Household Consumption: Evidence from China’s Survey Data," Sustainability, MDPI, Open Access Journal, vol. 8(9), pages 1-15, September.
    22. Qingyuan Du & Shang Jin Wei, 2015. "A Darwinian Perspective on “Exchange Rate Undervaluationâ€," Working Papers id:7597, eSocialSciences.
    23. repec:red:issued:16-199 is not listed on IDEAS

    More about this item

    Keywords

    China; credit market imperfections; demographic transition; economic growth; fully funded system; inequality; intergenerational redistribution; labor supply; migration; pensions; poverty; rural-urban reallocation; total fertility rate; wage growth;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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