Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/192497 
Authors: 
Year of Publication: 
2007
Series/Report no.: 
Discussion Papers No. 515
Publisher: 
Statistics Norway, Research Department, Oslo
Abstract: 
Any contribution to a pay-as-you-go pension system may be considered mandatory savings to the extent that it gives a claim to a future benefit. Contributors to the economic literature have argued that an increase in this savings component will lower implicit marginal tax rates, thereby reducing distortions in the labour market. However, the efficiency gain created by increasing the actuarial component of pensions may come at the cost of increased inequality in pension benefits. The trade-off between efficiency and equity is not easy to quantify in actual public pension schemes whose benefit functions intrinsically exhibit non-linear characteristics. This paper develops a framework to quantify this trade-off in a fully specified pension system using dynamic micro-simulation modelling. The methodology is then applied to five different pension schemes actually proposed for Norway. The results demonstrate the relevance of this study: The improvement of the equity-efficiency trade-off either does not materialise, as in one case, or is arguably driven by a different factor than advocated by policymakers.
Subjects: 
Pension reform
social security
equity
labour supply
and efficiency.
JEL: 
H53
H55
D31
J22
Document Type: 
Working Paper

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