Capital-Skill Complementarity and the Redistributive Effects of Social Security Reform

22 Pages Posted: 28 Mar 2003

See all articles by Alessandra Casarico

Alessandra Casarico

Bocconi University - Department of Policy Analysis and Public Management; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Carlo Devillanova

Bocconi University - Department of Policy Analysis and Public Management

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Date Written: February 2003

Abstract

This Paper analyses the general equilibrium implications of reforming pay-as-you-go pension systems in an economy with heterogeneous agents, human capital investment and capital-skill complementarity. It shows that increasing funding in the long-run delivers higher physical and human capital and therefore higher output, but also higher wage and income inequality. The latter affects preferences over the degree of redistribution of the remaining pay-as-you-go component: Despite the greater role that redistribution could perform in the new steady state, we find a preference for lower redistribution for a larger group of the population.

Keywords: Capital-skill complementarity, inter and intragenerational redistribution, pay-as-you-go, fully funded

JEL Classification: H55, J31

Suggested Citation

Casarico, Alessandra and Devillanova, Carlo, Capital-Skill Complementarity and the Redistributive Effects of Social Security Reform (February 2003). CEPR Discussion Paper No. 3773. Available at SSRN: https://ssrn.com/abstract=390664

Alessandra Casarico (Contact Author)

Bocconi University - Department of Policy Analysis and Public Management ( email )

Via Roentgen 1
Milan, 20136
Italy

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

Carlo Devillanova

Bocconi University - Department of Policy Analysis and Public Management ( email )

Via Roentgen 1
Milan, 20136
Italy

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