Population Aging, Fiscal Sustainability and PAYG Pension Reform

Takaaki Morimoto (), Yuta Nakabo () and Ken Tabata
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Takaaki Morimoto: Graduate School of Economics, Osaka University
Yuta Nakabo: Graduate School of Economics, Osaka University

No 140, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: This paper examines how pay-as-you-go (PAYG) pension reform from a defined-benefit scheme to a defined-contribution scheme affects fiscal sustainability and economic growth in an overlapping generations model with endogenous growth. We show that in economies in which the old-age dependency ratio is high and the size of pension benefits under a defined-benefit scheme is large, such a pension reform mitigates the negative effect of population aging on fiscal sustainability and economic growth. However, we also show that this type of pension reform entails an intergenerational conflict of interest between current and future generations. Population aging might exacerbate the extent of this conflict.

Keywords: Population aging; PAYG pensions; Defined-benefit schemes; Definedcontribution schemes; Fiscal sustainability (search for similar items in EconPapers)
JEL-codes: D91 H55 O41 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2016-02, Revised 2016-02
New Economics Papers: this item is included in nep-age, nep-dge, nep-gro and nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:kgu:wpaper:140

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