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

  • 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)

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.

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Paper provided by USI Università della Svizzera italiana in its series CEPRA working paper with number 1203.

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Length: 50 pages
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:lug:wcepra:1203
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  1. Chang-Tai Hsieh & Peter J Klenow, 2008. "Misallocation and Manufacturing TFP in China and India," 2008 Meeting Papers 121, Society for Economic Dynamics.
  2. Feldstein, Martin, 1999. "Social Security Pension Reform in China," Scholarly Articles 2794835, Harvard University Department of Economics.
  3. Felix Salditt & Peter Whiteford & Willem Adema, 2007. "Pension Reform in China: Progress and Prospects," OECD Social, Employment and Migration Working Papers 53, OECD Publishing.
  4. Zilibotti, Fabrizio & Aghion, Philippe & Acemoglu, Daron, 2006. "Distance to Frontier, Selection, and Economic Growth," Scholarly Articles 4554122, Harvard University Department of Economics.
  5. Greg Kaplan & Sam Schulhofer-Wohl, 2012. "Understanding the Long-Run Decline in Interstate Migration," NBER Working Papers 18507, National Bureau of Economic Research, Inc.
  6. Robert J. Barro & Jong-Wha Lee, 2010. "A New Data Set of Educational Attainment in the World, 1950-2010," NBER Working Papers 15902, National Bureau of Economic Research, Inc.
  7. Feldstein, Martin, 1999. "Social security pension reform in China," China Economic Review, Elsevier, vol. 10(2), pages 99-107.
  8. Kai Liu & Marcos Chamon & Eswar Prasad, 2010. "Income Uncertainty and Household Savings in China," IMF Working Papers 10/289, International Monetary Fund.
  9. Barr, Nicholas & Diamond, Peter, 2008. "Reforming Pensions: Principles and Policy Choices," OUP Catalogue, Oxford University Press, number 9780195311303.
  10. William Lavely, 2001. "First Impressions from the 2000 Census of China," Population and Development Review, The Population Council, Inc., vol. 27(4), pages 755-769.
  11. Zhang, Junsen & Zhao, Yaohui & Park, Albert & Song, Xiaoqing, 2005. "Economic returns to schooling in urban China, 1988 to 2001," Journal of Comparative Economics, Elsevier, vol. 33(4), pages 730-752, December.
  12. Michael Keane, 2010. "Labor Supply and Taxes: A Survey," Working Paper Series 160, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
  13. Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, vol. 57(4), pages 779-813, July.
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