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


Song, Zheng; Storesletten, Kjetil; Wang, Yikai; Zilibotti, Fabrizio (2015). Sharing high growth across generations: Pensions and demographic transition in China. American Economic Journal: Macroeconomics, 7(2):1-39.

Abstract

We analyze intergenerational redistribution in emerging economies with the aid of an overlapping generations model with endogenous labor supply. Growth is initially high but declines over time. A version of the model calibrated to China is used to analyze the welfare effects of alternative pension reforms. Although a reform of the current system is necessary to achieve financial sustainability, 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.

Abstract

We analyze intergenerational redistribution in emerging economies with the aid of an overlapping generations model with endogenous labor supply. Growth is initially high but declines over time. A version of the model calibrated to China is used to analyze the welfare effects of alternative pension reforms. Although a reform of the current system is necessary to achieve financial sustainability, 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.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:2015
Deposited On:02 Feb 2015 10:08
Last Modified:27 May 2016 14:09
Publisher:American Economic Association
ISSN:1945-7715
Publisher DOI:https://doi.org/10.1257/mac.20130322
Related URLs:http://dx.doi.org/10.5167/uzh-75839

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