Social security, income inequality and growth

Garrec, Gilles Le

doi:10.1017/s1474747211000229

Cited by 16 publications

(17 citation statements)

References 29 publications

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“…Others have investigated the relationship between the pension system and investment in human capital formation, as a major determinant of productivity growth (e.g. Zhang, 1995;Kemnitz and Wigger, 2000;Zhang and Zhang, 2003;Kaganovich and Meier, 2008;Le Garrec, 2012). Still others have demonstrated the crucial role of human capital formation to counteract the negative effects of population ageing on per capita output (e.g.…”

Section: Introductionmentioning

confidence: 99%

Pension reform in an OLG model with heterogeneous abilities

Buyse

Heylen

Kerckhove

2015

Journal of Pension Economics and Finance

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We study the effects of pension reform in a four-period OLG model for an open economy where hours worked by three active generations, education of the young, the retirement decision of older workers, and aggregate growth, are all endogenous. Within each generation we distinguish individuals with high, medium or low ability to build human capital. This extension allows to investigate also the effects of pension reform on the income and welfare levels of different ability groups. Particular attention goes to the income at old-age and the welfare level of low-ability individuals. Our simulation results prefer an intelligent pay-as-you-go pension system above a fully-funded private system. When it comes to promoting employment, human capital, growth, and aggregate welfare, positive effects in a pay-as-you-go system are the strongest when it includes a tight link between individual labor income (and contributions) and the pension, and when it attaches a high weight to labor income earned as an older worker to compute the pension assessment base. Such a regime does, however, imply welfare losses for the current low-ability generations, and rising inequality in welfare. Complementing or replacing this 'intelligent' pay-as-you-go system by basic and/or minimum pension components is negative for aggregate welfare, employment and growth. Better is to maintain the tight link between individual labor income and the pension also for low-ability individuals, but to strongly raise their replacement rate.

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Section: Introductionmentioning

confidence: 99%

Pension reform in an OLG model with heterogeneous abilities

Buyse

Heylen

Kerckhove

2015

Journal of Pension Economics and Finance

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“…We could have assumed alternatively that training is a part-time activity without changing the qualitative results (see Le Garrec, 2005).…”

Section: Human Capital and Age-earnings Pro…lesmentioning

confidence: 99%

“…Assuming for simplicity as in Docquier and Paddison (2003) and Le Garrec (2012) that skilled and unskilled labors are perfect substitutes 11 ,…”

Section: Firmsmentioning

confidence: 99%

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Increased longevity and social security reform: questioning the optimality of individual accounts when education matters

Garrec

2014

J Popul Econ

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In many European countries, population aging had led to debate about a switch from conventional unfunded public pension systems to notional systems characterized by individual accounts. In this article, we develop an overlapping generations model in which endogenous growth is based on an accumulation of knowledge driven by the proportion of skilled workers and by the time they have spent in training. In such a framework, we show that conventional pension systems, contrary to notional systems, can enhance economic growth by linking bene…ts only to the partial earnings history. Thus, to ensure economic growth, the optimal adjustment to increased longevity could consist in increasing the size of existing retirement systems rather than switching to notional systems.

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“…Le Garrec 1 argues that an actuarially fair pay-as-you-go (PAYG) pension system can both reduce lifetime income inequality and enhance economic growth. However, the challenge of demographic ageing places growing demands on the resources that are available to fi nance the UK ' s PAYG pension arrangements, particularly the fi rst pillar social insurance scheme, the Basic State Pension (BSP).…”

Section: Introductionmentioning

confidence: 99%

The value of incentives to defer the UK state pension

Farrar

Moizer²,

Hyde³

2012

Pensions Int J

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Sue Farraris a Lecturer in Accounting and Finance at Plymouth Business School. Sue has an interest in contemporary development in the world of pensions and also has undertaken research in the areas of stock market effi ciency and corporate investment and fi nancing decisions. She is a Co-director of Pensions Worldwide , a research group whose work is intended to inform pensions policy, and co-editor of Social and Public Policy Review (University of Plymouth Press). Jonathan Moizeris an Associate Professor in Business Operations and Strategy, and is a Co-director of Pensions Worldwide . Jonathan ' s research interests include the use of computerised simulation for both policy decision-making and learning. He has particular interest in the use of system dynamics modelling as a simulation approach for learning and insight generation. ABSTRACT The UK state pension system is confronted by the pressures of adverse demographics and the possibility of growing retirement income security. This article evaluates one public policy response to these pressures: measures to incentivise deferral of statutory retirement. It appraises the fi nancial benefi ts of deferral options under assumptions concerning life expectancy, tax rates, real terms pension growth and length of deferral period. The results show an incentive to defer, particularly where the pension enhancement option is selected over the lump sum payment. Overall, the analysis suggests that the measures to encourage the take-up of existing fi rst pillar deferral options would be benefi cial.

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Social security, income inequality and growth

Cited by 16 publications

References 29 publications

Pension reform in an OLG model with heterogeneous abilities

Pension reform in an OLG model with heterogeneous abilities

Increased longevity and social security reform: questioning the optimality of individual accounts when education matters

The value of incentives to defer the UK state pension

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