Discussion paper

DP9156 Sharing High Growth Across Generations: Pensions and Demographic Transition in China

Intergenerational inequality and old-age poverty are salient issues in contemporary China. China's aging population threatens the fiscal sustainability of its pension system, a key vehicle for intergenerational redistribution. We analyze the positive and normative effects of alternative pension reforms, using a dynamic general equilibrium model that incorporates population dynamics and productivity growth. Although a reform is necessary, 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. High wage growth is key for these results.

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Citation

Zilibotti, F, K Storesletten, Z Song and Y Wang (eds) (2012), “DP9156 Sharing High Growth Across Generations: Pensions and Demographic Transition in China”, CEPR Press Discussion Paper No. 9156. https://cepr.org/publications/dp9156