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Pension finance in a calibrated model of saving and income distribution for the UK

Published online by Cambridge University Press:  26 March 2020

James Sefton ,
Jayasri Dutta  and
Martin Weale
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Abstract

Traditional macroeconomic models are based on the concept of a single representative consumer. A great deal can be gained by constructing a dynamic general equilibrium economic model which represents the behaviour of a panel of consumers spread out along the income distribution. Such a framework allows us to assess the distributional impact of policy changes. We present here such a model, showing the behaviour of consumers facing uncertain incomes and we use it to assess the distributional impact of changes to pension provision. We find that means testing of old age pensions increases inequality among the retired because of the effect it has on incentives to save.

Type
Articles
Information
National Institute Economic Review , Volume 166 , October 1998 , pp. 97 - 107
Copyright
Copyright © 1998 National Institute of Economic and Social Research

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Footnotes

An earlier version of this paper was presented to a Conference on the Macroeconomics of Inequality in Cambridge. We are grateful to the participants and particularly to Tim Kehoe for comments received. This work has been financed by the ESRC.

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