The spillover effects of pension reform with labour and capital mobility

This paper studies the spillover e ects of pension reform in a a two-country two-overlapping-generations model with capital and labour mobility. A stable equilibrium is achieved assuming the presence of an immobile production factor.The long-run effects of pension reform are derived analytically, and the short run dynamics is simulated. It is shown that in general, without international redistribution, benefits and losses caused by a switch from a PAYG to a more funded pension scheme in one country are shared by the neighbouring country.Introducing a central government in the union, which redistributes benefits and losses of the reform both intergenerationally and internationally allows for a globally welfare improving reform if countries a asymmetric, i.e., when the size of the PAYG scheme in one country is larger than in the other.

Netspar, Network for Studies on Pensions, Aging and Retirement, is een denktank en kennisnetwerk. Netspar is gericht op een goed geïnformeerd pensioendebat.


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