Coordination of pension systems when technologies are different

Igor Fedotenkov

This article presents a simple condition for optimal coordination of social security policies in the union of two open economies employing different production functions and within which capital and labour are fully mobile. We find that if both countries run fully funded pension schemes, the allocation of mobile production factors may not be optimal when the countries have different technologies. To remove this distortion, at least one country must run a pay-as-you-go pension scheme. Policy coordination which takes technological differences into account allows for the removal of static inefficiencies, maximizing the welfare of the agents in the steady state.

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Year of publication:	2014
Authors:	Fedotenkov, Igor
Published in:	CESifo economic studies : CESifo, a joint initiative of the University of Munich's Center for Economic Studies and the Ifo Institute. - Oxford : Oxford Univ. Press, ISSN 1610-241X, ZDB-ID 2098761-4. - Vol. 60.2014, 1, p. 246-256
Subject:	pensions \| policy coordination \| technological differences \| optimality \| Theorie \| Theory \| Gesetzliche Rentenversicherung \| Public pension system \| Technischer Fortschritt \| Technological change \| Overlapping Generations \| Overlapping generations \| Altersvorsorge \| Retirement provision \| Technologie \| Technology