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

Author Info

  • 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.

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File URL: http://doc.rero.ch/lm.php?url=1000,42,6,20120917152040-LZ/CEPRA_03_2012.pdf
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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
Contact details of provider: Web page: https://www.bul.sbu.usi.ch

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;

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Find related papers by 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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  1. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, MIT Press, vol. 124(4), pages 1403-1448, November.
  2. Chamon, Marcos & Liu, Kai & Prasad, Eswar, 2010. "Income Uncertainty and Household Savings in China," IZA Discussion Papers 5331, Institute for the Study of Labor (IZA).
  3. Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, vol. 57(4), pages 779-813, July.
  4. Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2006. "Distance to Frontier, Selection, and Economic Growth," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 37-74, 03.
  5. 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.
  6. 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.
  7. 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.
  8. Barr, Nicholas & Diamond, Peter, 2008. "Reforming Pensions: Principles and Policy Choices," OUP Catalogue, Oxford University Press, number 9780195311303, March.
  9. Felix Salditt & Peter Whiteford & Willem Adema, 2007. "Pension Reform in China: Progress and Prospects," OECD Social, Employment and Migration Working Papers 53, OECD Publishing.
  10. Martin Feldstein, 1998. "Social Security Pension Reform in China," NBER Working Papers 6794, National Bureau of Economic Research, Inc.
  11. Feldstein, Martin, 1999. "Social Security Pension Reform in China," Scholarly Articles 2794835, Harvard University Department of Economics.
  12. Greg Kaplan & Sam Schulhofer-Wohl, 2012. "Understanding the long-run decline in interstate migration," Working Papers 697, Federal Reserve Bank of Minneapolis.
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Cited by:

  1. Chen, Qin & Song, Zheng, 2014. "Accounting for China's urbanization," China Economic Review, Elsevier, vol. 30(C), pages 485-494.
  2. Chen, kaiji & Wen, Yi, 2014. "The great housing boom of China," Working Papers 2014-22, Federal Reserve Bank of St. Louis.
  3. Banerjee, Abhijit & Meng, Xin & Porzio, Tommaso & Qian, Nancy, 2014. "Aggregate Fertility and Household Savings: A General Equilibrium Analysis using Micro Data," CEPR Discussion Papers 9935, C.E.P.R. Discussion Papers.
  4. 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.
  5. Ge, Suqin & Yang, Dennis T. & Zhang, Junsen, 2012. "Population Policies, Demographic Structural Changes, and the Chinese Household Saving Puzzle," IZA Discussion Papers 7026, Institute for the Study of Labor (IZA).

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