The Intragenerational Redistributive Effects of Unfunded Pension Programs

IMF Working Papers, December 1, 1998

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The Intragenerational Redistributive Effects of Unfunded Pension Programs

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Bibliographic details

• Authors: Luis M. Cubeddu
• Published: December 1, 1998
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451859089.001

Summary

• This paper provides a quantitative evaluation of the intracohort redistributive elements of the U.S. social security system in the context of a computable general equilibrium model.
• It determines how the well-being of individuals that differ by gender, race, and education is affected by the government’s social security policy.
• Differences in life expectancy and labor productivity translate into differences in capital accumulation and labor supply distortions that are responsible for the observed welfare difference between individuals of the same age cohort.

Methodology

• Model framework: computable general equilibrium model (as stated in the paper).
• Calibration and analysis elements (as listed in keywords): calibration procedure, benchmark economy, simulation, sensitivity analysis.
• Key model ingredients referenced: demographics, earnings profile, productivity peak, production function, share parameter, expected return, rate of return.

Key findings and mechanisms

• Intracohort redistribution arises through interactions of:
  • Heterogeneity in life expectancy by gender, race, and education.
  • Heterogeneity in labor productivity and earnings profiles.
  • Resulting differences in capital accumulation across population subgroups.
  • Labor supply distortions induced by the social security policy.
• These channels together explain observed welfare differences between individuals of the same age cohort under the U.S. social security system.

Policy-relevant implications (as implied by analysis)

• Social security policy has differential welfare impacts across demographic and socioeconomic groups within the same cohort due to:
  • Variations in life expectancy.
  • Variations in labor productivity and earnings.
• Any reform of unfunded pension programs should account for:
  • Distributional effects across gender, race, and education groups.
  • Impacts on capital accumulation and labor supply incentives that feed back into welfare outcomes.

Content in this bundle

• The Intragenerational Redistributive Effects of Unfunded Pension Programs - WP/98/180
  • The Intragenerational Redistributive Effects of Unfunded Pension Programs - WP/98/180 (Markdown version)
  • The Intragenerational Redistributive Effects of Unfunded Pension Programs - WP/98/180 (PDF)