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Working Longer in China: Implicit Tax or Subsidy?

Jing Xu and Xinmei Wang

No 675, CIS Discussion paper series from Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University

Abstract: Using the conventional concept of implicit tax, we investigate pension incentives to retire for private sector employees in China. The social security pension consists of pay-as-you-go defined benefit (DB) and defined contribution (DC) systems. Based on Chinese official parameters and the revised OECD models, our studies conclude that the DB system discourages people from working more, but the DC system offers considerably greater incentives at the expense of financial sustainability. If the annuity factors in the DC scheme were linked to the probability of retirees’ mortality, then both constant incentives to work longer and financial sustainability could be achieved.

Keywords: implicit tax; incentives; pension wealth; social security pension; working longer (search for similar items in EconPapers)
JEL-codes: C53 C54 H55 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-cna, nep-pub and nep-tra
Date: 2018-12
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