Intergenerational Redistribution in a Pay-as-you-go Pension System

Jacob Lundberg

No 1488, Working Paper Series from Research Institute of Industrial Economics

Abstract: This study provides a comprehensive analysis of the generational wealth transfer within Sweden’s public pay-as-you-go pension system introduced in 1960. Using extensive administrative registers, the paper quantifies the contributions made and benefits received by each birth cohort. The findings reveal a substantial fiscal imbalance favouring the initial generation (born in the early 20th century), who received a net gain of $1.5 trillion in today’s present value, equivalent to up to 13% of their discounted lifetime income. This windfall for the initial generation resulted in an implicit tax on current workers, accounting for 70% of their pension contributions. However, the study also highlights the effectiveness of Sweden’s 1999 notional defined-contribution pension reform in stabilizing this imbalance. Unlike many international counterparts, Sweden’s reformed system successfully mitigates further generational inequities in the pension system.

Keywords: Pensions; Social security; Pay-as-you-go; Generational equity; Generational accounting (search for similar items in EconPapers)
JEL-codes: H55 N34 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2024-05-02
New Economics Papers: this item is included in nep-age, nep-his, nep-pbe and nep-pub
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Journal Article: Intergenerational redistribution in a pay-as-you-go pension system (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:1488

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