Privatization of public pensions in Germany: who gains and how much?

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URI: http://nbn-resolving.de/urn:nbn:de:bsz:21-opus-21484
http://hdl.handle.net/10900/47463
Dokumentart: ResearchPaper
Date: 1998
Source: Tübinger Diskussionsbeiträge der Wirtschaftswissenschaftlichen Fakultät ; 148
Language: English
Faculty: 6 Wirtschafts- und Sozialwissenschaftliche Fakultät
Department: Wirtschaftswissenschaften
DDC Classifikation: 330 - Economics
Keywords: Rentenfinanzierung , Rentenpolitik
License: Publishing license excluding print on demand
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Abstract:

This paper examines the distributional and efficiency effects of pension privatization in Germany. Starting from a benchmark that refects the current unfunded pension system, a fully funded system is introduced. The accrued benefits of the old system are financed by alternative tax combinations as well as deficit increases. The quantitative analysis is based on an Auerbach-Kotliko type simulation model that distinguishes between five lifetime income classes within each age cohort. The simulations reveal a clear trade-off between the efficiency and equity aspects of alternative financing schemes. While consumption taxes are the most efficient financing instrument, they also undermine intra- and intergenerational equity. Phasing-out the unfunded system on the other hand not only dampens the income redistribution across and within generations, but also reduces the efficiency gains dramatically.

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