The impact of reducing the pension generosity on inequality and schooling

Miguel Sánchez-Romero and Alexia Fürnkranz-Prskawetz

No 07/2019, ECON WPS - Working Papers in Economic Theory and Policy from TU Wien, Institute of Statistics and Mathematical Methods in Economics, Economics Research Unit

Abstract: In this paper we investigate the impact of a reduction in the pension replacement rate on the schooling choice and on inequality. We develop an overlapping generations model in which individuals differ by their life expectancy and in the cost of attending schooling. Individuals optimally choose their consumption path and their educational attainment. Within our framework we first show how many progressive pension systems are ex ante regressive due to the difference in life expectancy across skill groups and, second, we derive the level of progressivity that restores an equal treatment of the pension system across skill groups.

Keywords: Human capital; Longevity; Inequality; Life cycle; Social security; Pension; Progressivity (search for similar items in EconPapers)
JEL-codes: E24 H55 J10 J18 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-age, nep-dem, nep-dge, nep-mac and nep-ore
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https://www.econstor.eu/bitstream/10419/208365/1/1683705688.pdf (application/pdf)

Related works:
Journal Article: The Impact of Reducing the Pension Generosity on Inequality and Schooling (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tuweco:072019

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