Trade and Pension Systems
25 Pages Posted: 7 Mar 2008
Date Written: 2006
This article concentrates on the possible relationship between trade and pension systems. I consider trade between a capital-abundant home and a labor-abundant foreign country. The underlying model is a two-period overlapping generations-model augmented with factor-price changes resulting from price-variations through globalization. First, I analyze the resulting income effects of the young generation and of the retirees in a pay-as-you-go (PAYG) pension system and a fully funded pension system. Considering contribution rates and population growth, the retirees might improve their income situation in a fully funded system. Second, I analyze the effects on life income when a pension system change is implemented simultaneous with the reduction of trade barriers. A less expensive change can be expected, if free trade is permitted.
Keywords: Pay-as-you-go pension system, fully funded pension system, Heckscher-Ohlin-Samuelson, trade with low-wage-countries
JEL Classification: F10, H55
Suggested Citation: Suggested Citation
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