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Inequality in an OLG economy with heterogeneous cohorts and pension systems

Krzysztof Makarski (), Joanna Tyrowicz () and Marcin Bielecki ()

No 21, GRAPE Working Papers from GRAPE Group for Research in Applied Economics

Abstract: We analyze the consumption and wealth inequality in an OLG model with obligatory pension systems. Our framework features within cohort heterogeneity of endowments (individual productivities) and heterogeneity of preferences (preference for leisure and time preference). We allow for population aging and gradual productivity slowdown. We show four main results. First, longevity increases substantially aggregate consumption inequality and wealth inequality, regardless of the pension system features. Second, the effect of a pension system reform from a defined benefit to a defined contribution works to reinforce the consumption inequality and reduce the wealth inequality. Third, minimum pension benefits are able to counteract a part of that increase in inequality, at a fiscal cost. Fourth the minimum pension benefit guarantee addresses mostly the inequality which stems from differentiated endowments and not that which stems from heterogeneous preferences.

Keywords: majority voting; pension system reform; welfare (search for similar items in EconPapers)
JEL-codes: E32 E44 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-dge and nep-mac
Date: 2017
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http://grape.org.pl/WP/21_BieleckiMakarskiTyrowicz_website.pdf (application/pdf)

Related works:
Journal Article: Inequality in an OLG economy with heterogeneous cohorts and pension systems (2018) Downloads
Journal Article: Inequality in an OLG economy with heterogeneous cohorts and pension systems (2018) Downloads
Working Paper: Inequality in an OLG economy with heterogeneous cohorts and pension systems (2018) Downloads
Working Paper: Inequality in an OLG Economy with Heterogeneous Cohorts and Pension Systems (2018) Downloads
Working Paper: Inequality in an OLG Economy with Heterogeneous Cohorts and Pension Systems (2017) Downloads
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