Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/180369
Authors: 
Tyrowicz, Joanna
Makarski, Krzysztof
Bielecki, Marcin
Year of Publication: 
2018
Series/Report no.: 
IAAEU Discussion Paper Series in Economics 08/2018
Abstract: 
We analyze the consumption and wealth inequality in an OLG model with mandatory pension systems. Our framework features within cohort heterogeneity of endowments and heterogeneity of preferences. We allow for population aging and gradual decline in TFP growth. We show four main results. First, increasing longevity translates to substantial increases in aggregate consumption inequality and wealth inequality. Second, a pension system reform from a defined benefit to a defined contribution works to reinforce consumption inequality and reduce wealth inequality. Third, minimum pension benefits are able to partially counteract an increase in inequality introduced by the defined contribution system, at a fiscal cost. Fourth the minimum pension benefit guarantee mostly addresses the sources of inequality which stem from differentiated endowments rather than those which stem from heterogeneous preferences.
Subjects: 
consumption
wealth
inequality
longevity
defined contribution
defined benefit
JEL: 
H55
E17
C60
C68
E21
D63
Document Type: 
Working Paper
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