The Impact of Reducing the Pension Generosity on Inequality and Schooling

We investigate the impact of a reduction in the pension replacement rate on the schooling choice and on inequality in an overlapping generations model in which individuals differ by their life expectancy and in their cost of attending schooling. Within our framework we illustrate that many pension s...

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Bibliographic Details
Published in:De Economist (Netherlands) 2020-06, Vol.168 (2), p.279-304
Main Authors: Sanchez-Romero, Miguel, Prskawetz, Alexia
Format: Article
Language:English
Subjects:
Economic Policy
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Education reform
Inequality
Life expectancy
Microeconomics
Pensions
Public Finance
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Summary:We investigate the impact of a reduction in the pension replacement rate on the schooling choice and on inequality in an overlapping generations model in which individuals differ by their life expectancy and in their cost of attending schooling. Within our framework we illustrate that many pension systems are ex ante regressive due to the difference in life expectancy across skill groups. We then derive the level of progressivity that needs to be implemented to restore an equal treatment of the pension system across skill groups.
ISSN:0013-063X
1572-9982
DOI:10.1007/s10645-020-09359-w