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Intragenerational redistribution in a funded pension system

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  • FRASSI, BENEDETTA
  • GNECCO, GIORGIO
  • PAMMOLLI, FABIO
  • WEN, XUE

Abstract

In a general equilibrium framework, this paper studies the properties, in terms of labour market distortions and capital accumulation, of three social security systems: a pay-as-you-go notional defined contribution (PAYG NDC), a fully funded (FF), and a novel modified FF (MFF) system, which includes an intragenerational redistributive component to guarantee minimum living standards to future low-income retirees. We show that while PAYG NDC depresses labour supply and physical capital accumulation, FF is neutral on both dimensions. Conversely, MFF slightly increases physical capital accumulation, without significantly reducing labour supply incentives. Moreover, it reduces the burden of future intergenerational redistribution, and increases social welfare.

Suggested Citation

  • Frassi, Benedetta & Gnecco, Giorgio & Pammolli, Fabio & Wen, Xue, 2019. "Intragenerational redistribution in a funded pension system," Journal of Pension Economics and Finance, Cambridge University Press, vol. 18(2), pages 271-303, April.
    • Handle: RePEc:cup:jpenef:v:18:y:2019:i:02:p:271-303_00
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    2. Gustafsson, Johan, 2021. "Implications of Pension Illiteracy for Labor Supply and Redistribution," Umeå Economic Studies 993, Umeå University, Department of Economics.
    3. Gustafsson, Johan, 2023. "Public pension reform with ill-informed individuals," Economic Modelling, Elsevier, vol. 121(C).
    4. Gustafsson, Johan, 2021. "Public Pension Reform and the Equity-Efficiency Trade-off," Umeå Economic Studies 992, Umeå University, Department of Economics.

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