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


Song, Zheng; Storesletten, Kjetil; Wang, Yikai; Zilibotti, Fabrizio (2012). Sharing high growth across generations: Pensions and demographic transition in China. UBS Center Working Paper Series 1, University of Zurich : UBS International Center of Economics in Society.

Abstract

Intergenerational inequality and old-age poverty are salient issues 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 equi- librium 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.

Abstract

Intergenerational inequality and old-age poverty are salient issues 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 equi- librium 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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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > UBS International Center of Economics in Society
03 Faculty of Economics > Department of Economics
Working Paper Series > UBS Center Working Paper Series
Dewey Decimal Classification:330 Economics
JEL Classification:E21, E24, G23, H55, J11, J13, O43, R23
Uncontrolled 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
Language:English
Date:November 2012
Deposited On:07 Mar 2013 11:04
Last Modified:14 Aug 2017 10:53
Series Name:UBS Center Working Paper Series
Number of Pages:35
ISSN:2296-2751
Official URL:http://www.ubscenter.uzh.ch/wp-content/uploads/2012/12/WP1_Sharing_High_Growth_Across_Generations.pdf
Related URLs:http://www.ubscenter.uzh.ch/en/publications/workingpapers

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