scholarly journals The Political Economy of Municipal Pension Funding

2018 ◽  
Vol 10 (3) ◽  
pp. 215-246 ◽  
Author(s):  
Jeffrey Brinkman ◽  
Daniele Coen-Pirani ◽  
Holger Sieg
Keyword(s):  
Overlapping Generations ◽  
Land Market ◽  
Evidence Based ◽  
Overlapping Generations Model ◽  
Retirement Benefits ◽  
Pension Funding ◽  
Land Prices ◽  
Intergenerational Redistribution ◽  
Public Sector Employees ◽  
Pension Liabilities

Many US municipalities have committed to pay retirement benefits to public sector employees but have not saved enough to fulfill these obligations. This paper studies the determinants of municipal pension funding and its implications for intergenerational redistribution using an overlapping generations model. Under perfect capital markets, pension funding choices are fully capitalized into land prices. This neutrality result fails if agents face a binding downpayment constraint in the land market: old agents prefer a pay-as-you go system, while young agents find a fully funded system optimal. Empirical evidence based on cross-city comparisons of pension liabilities is consistent with these predictions. (JEL H72, H75, J32, J45)

scholarly journals Sharing High Growth across Generations: Pensions and Demographic Transition in China

2015 ◽  
Vol 7 (2) ◽  
pp. 1-39 ◽  
Author(s):  
Zheng Song ◽  
Kjetil Storesletten ◽  
Yikai Wang ◽  
Fabrizio Zilibotti
Keyword(s):  
Emerging Economies ◽  
Overlapping Generations ◽  
Current System ◽  
High Growth ◽  
Future Generations ◽  
Financial Sustainability ◽  
Welfare Gains ◽  
Overlapping Generations Model ◽  
Intergenerational Redistribution ◽  
Endogenous Labor

We analyze intergenerational redistribution in emerging economies with the aid of an overlapping generations model with endogenous labor supply. Growth is initially high but declines over time. A version of the model calibrated to China is used to analyze the welfare effects of alternative pension reforms. Although a reform of the current system is necessary to achieve financial sustainability, delaying its implementation implies large welfare gains for the (poorer) current generations, imposing only small costs on (richer) future generations. In contrast, a fully funded reform harms current generations, with small gains to future generations. (JEL E13, H55, J11, O11, O15, P24, P36)

scholarly journals INCOME INEQUALITY, MOBILITY, AND THE WELFARE STATE: A POLITICAL ECONOMY MODEL

2012 ◽  
Vol 17 (6) ◽  
pp. 1198-1226 ◽  
Author(s):  
Luca Bossi ◽  
Gulcin Gumus
Keyword(s):  
Income Inequality ◽  
Welfare State ◽  
Social Insurance ◽  
Overlapping Generations ◽  
Tax Rates ◽  
Overlapping Generations Model ◽  
Public Programs ◽  
Transfer Payments ◽  
Set Up ◽  
The Welfare State

In this paper, we set up a three-period stochastic overlapping-generations model to analyze the implications of income inequality and mobility for demand for redistribution and social insurance. We model the size of two different public programs under the welfare state. We investigate bidimensional voting on the tax rates that determine the allocation of government revenues among transfer payments and old-age pensions. We show that the coalitions formed, the resulting political equilibria, and the demand for redistribution crucially depend on the level of income inequality and mobility.

scholarly journals Endogenous Agency Problems and the Dynamics of Rents

2020 ◽  
Vol 87 (6) ◽  
pp. 2542-2567
Author(s):  
B Biais ◽  
A Landier
Keyword(s):  
Overlapping Generations ◽  
Agency Problems ◽  
Overlapping Generations Model ◽  
Complex Tasks ◽  
Complex Skills ◽  
Do So

Abstract While potentially more productive, more complex tasks generate larger agency rents. Agents therefore prefer to acquire complex skills, to earn large rents. In our overlapping generations model, their ability to do so is kept in check by competition with predecessors. Old agents, however, are imperfect substitutes for young ones, because the latter are easier to incentivize, thanks to longer horizons. This reduces competition between generations, enabling young managers to go for larger complexity than their predecessors. Consequently, equilibrium complexity and rents gradually increase beyond what is optimal for the principal and for society.

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