The transfer paradox in a pay-as-you-go pension system
Kojun Hamada (),
Akihiko Kaneko and
Mitsuyoshi Yanagihara ()
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Kojun Hamada: Faculty of Economics, Niigata University
Mitsuyoshi Yanagihara: Graduate School of Economics, Nagoya University
No 1405, Working Papers from Waseda University, Faculty of Political Science and Economics
We examine how international transfer affects welfare levels of a donor with a higher marginal propensity to save and a recipient with a lower marginal propensity to save, when both countries adopt a pay-as-you-go (PAYG) pension system using a one-sector overlapping generations model. A PAYG pension scheme is found to lead to impairment of the donor and of the recipient as a result of the transfer under the dynamic efficiency condition. This is because the transfer increases the divergence in the rate of return between PAYG and private savings.
Keywords: ay-as-you-go pension; Transfer paradox; Overlapping generations model (search for similar items in EconPapers)
JEL-codes: D91 E21 F35 F43 H55 (search for similar items in EconPapers)
Pages: 12 pages
New Economics Papers: this item is included in nep-age and nep-mac
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Journal Article: The transfer paradox in a pay-as-you-go pension system (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:wap:wpaper:1405
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