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Coordination of Pension Systems When Technologies are Different

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  • Igor Fedotenkov

Abstract

This article presents a simple condition for optimal coordination of social security policies in the union of two open economies employing different production functions and within which capital and labour are fully mobile. We find that if both countries run fully funded pension schemes, the allocation of mobile production factors may not be optimal when the countries have different technologies. To remove this distortion, at least one country must run a pay-as-you-go pension scheme. Policy coordination which takes technological differences into account allows for the removal of static inefficiencies, maximizing the welfare of the agents in the steady state. (JEL codes: F22, F42, H55)

Suggested Citation

  • Igor Fedotenkov, 2014. "Coordination of Pension Systems When Technologies are Different," CESifo Economic Studies, CESifo Group, vol. 60(1), pages 246-256.
    • Handle: RePEc:oup:cesifo:v:60:y:2014:i:1:p:246-256.
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    File URL: http://hdl.handle.net/10.1093/cesifo/ifu004
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    References listed on IDEAS

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    1. Marko Köthenbürger & Panu Poutvaara, 2006. "Social Security Reform and Investment in Education: Is There Scope for a Pareto Improvement?," Economica, London School of Economics and Political Science, vol. 73(290), pages 299-319, May.
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    5. Igor Fedotenkov & Lex Meijdam, 2014. "Pension reform with migration and mobile capital: is a Pareto improvement possible?," International Economics and Economic Policy, Springer, vol. 11(3), pages 431-450, September.
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    More about this item

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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