Sharing High Growth across Generations: Pensions and Demographic Transition in China

UBS Center Working Paper Series, Working Paper No. 1, November 2012

52 Pages Posted: 6 Jun 2013

See all articles by Zheng Michael Song

Zheng Michael Song

Fudan University - School of Economics

Kjetil Storesletten

University of Oslo - Department of Economics; Centre for Economic Policy Research (CEPR)

Yikai Wang

University of Zurich

Fabrizio Zilibotti

Centre for Economic Policy Research (CEPR); Yale University

Date Written: November 1, 2012

Abstract

Intergenerational inequality and old-age poverty are salient issues in contemporary China. China’s aging population threatens the fiscal sustainability of its pension system, a key vehicle for intergenerational redistribution. We analyze the positive and normative effects of alternative pension reforms, using a dynamic general equilibrium model that incorporates population dynamics and productivity growth. Although a reform is necessary, delaying its implementation implies large welfare gains for the (poorer) current generations, imposing only small costs on (richer) future generations. In contrast, a fully funded reform harms current generations, with small gains to future generations. High wage growth is key for these results.

Keywords: China, Credit market imperfections, Demographic transition, Economic growth, Fully funded system, Inequality, Intergenerational redistribution, Labor supply, Migration, Pensions, Poverty, Rural-urban reallocation, Total fertility rate, Wage growth

JEL Classification: E21, E24, G23, H55, J11, J13, O43, R23

Suggested Citation

Song, Zheng and Storesletten, Kjetil and Wang, Yikai and Zilibotti, Fabrizio and Zilibotti, Fabrizio, Sharing High Growth across Generations: Pensions and Demographic Transition in China (November 1, 2012). UBS Center Working Paper Series, Working Paper No. 1, November 2012, Available at SSRN: https://ssrn.com/abstract=2262375 or http://dx.doi.org/10.2139/ssrn.2262375

Zheng Song (Contact Author)

Fudan University - School of Economics ( email )

600 GuoQuan Road
Shanghai, 200433
China

Kjetil Storesletten

University of Oslo - Department of Economics ( email )

P.O. Box 1095 Blindern
N-0317 Oslo
Norway
+47 2284 4009 (Phone)
+47 2285 5035 (Fax)

HOME PAGE: http://folk.uio.no/kjstore/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Yikai Wang

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

Fabrizio Zilibotti

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Yale University ( email )

493 College St
New Haven, CT CT 06520
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
373
Abstract Views
1,909
Rank
146,211
PlumX Metrics