Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/19032
Authors: 
Fehr, Hans
Habermann, Christian
Year of Publication: 
2005
Series/Report no.: 
CESifo working papers 1568
Abstract: 
The present paper aims to quantify the welfare effects of progressive pension arrangements in Germany. Starting from a purely contribution-related benefit system, we introduce basic allowances for contributions and a flat benefit fraction. Since our overlapping-generations model takes into account variable labor supply, borrowing constraints as well as stochastic income risk, we can compare the labor supply, the liquidity, and the insurance effects of the policy reform. Our simulations indicate that for a realistic parameter combination an increase in pension progressivity would yield an aggregate efficiency gain of more than 2 percent of resources. However, such a reform would not be implemented because it would not find political support of the currently living generations.
Subjects: 
pension reform
idiosyncratic labor income uncertainty
JEL: 
H55
J26
Document Type: 
Working Paper

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