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Social security, income inequality and growth*

Published online by Cambridge University Press:  18 May 2011

GILLES LE GARREC
GILLES LE GARREC
Affiliation:
Sciences Po – OFCE, 69 quai d'Orsay, 75340 Paris Cedex 07, France (e-mail: gilles.legarrec@ofce.sciences-po.fr)
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Abstract

In most industrial countries, public pension systems redistribute from workers to retired people, not from high-income to low-income earners. They are close actuarial fairness. However, they are not all equivalent. In particular, some pension benefits are linked to full lifetime average earnings, while others are only linked to partial earnings history. In the latter case, we then show in this article that an actuarially fair pay-as-you-go pension system can both reduce lifetime income inequality and enhance economic growth. We also shed light on the dilemma between inequality and economic growth in retirement systems: greater progressivity results in less lifetime inequlity but also less growth.

Keywords

H55D91E24Social securityintertemporal choicehuman capital
Type
Articles
Information
Journal of Pension Economics & Finance , Volume 11 , Issue 1 , January 2012 , pp. 53 - 70
Copyright
Copyright © Cambridge University Press 2011

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