PAYG pension systems with capital mobility

Pierre Pestieau (1, 2, 3, 4) , Gwanaël Piaser (3, 5) , Motohiro Sato (6)

1 PJSE - Paris-Jourdan Sciences Economiques
2 CREPP - Center of Research in Public Economics and Population Economics
3 CORE - Center of Operation Research and Econometrics [Louvain]
4 CEPR - Center for Economic Policy Research
5 University of Ca’ Foscari [Venice, Italy]
6 Hitotsubashi University

This paper studies the design of an optimal pension scheme in an OLG and open economy model. The pension scheme provides a flat rate benefit and is based on the PAYG principle. It thus combines inter- and intra-generational redistribution. In this setting a number of symmetric economies are connected by an open and perfect capital market. When this number is very large, we have the small open economy case; when it is reduced to one, we have the case of autarky or perfect coordination. As the number of countries increases, there is more intragenerational redistribution, but less capital accumulation.

Domains: Humanities and Social Sciences; Economics and Finance

Pierre Pestieau, Gwanaël Piaser, Motohiro Sato. PAYG pension systems with capital mobility. International Tax and Public Finance, 2006, 13 (5), pp.587-599. ⟨10.1007/s10797-006-6079-3⟩. ⟨halshs-00754127⟩