Risk Sharing and Efficiency Implications of Progressive Pension Arrangements

Hans Fehr () and Christian Habermann

No 1568, CESifo Working Paper Series from CESifo

Abstract: The present paper aims to quantify the welfare effects of progressive pension arrangements in Germany. Starting from a purely contribution-related benefit system, we introduce basic allowances for contributions and a flat benefit fraction. Since our overlapping-generations model takes into account variable labor supply, borrowing constraints as well as stochastic income risk, we can compare the labor supply, the liquidity, and the insurance effects of the policy reform. Our simulations indicate that for a realistic parameter combination an increase in pension progressivity would yield an aggregate efficiency gain of more than 2 percent of resources. However, such a reform would not be implemented because it would not find political support of the currently living generations.

Keywords: pension reform; idiosyncratic labor income uncertainty (search for similar items in EconPapers)
JEL-codes: H55 J26 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-dge and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Journal Article: Risk Sharing and Efficiency Implications of Progressive Pension Arrangements* (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_1568

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