Pension Systems and Intragenerational Redistribution When Labor Supply is Endogenous

Alessandro Sommacal
2004 Social Science Research Network  
It is usually thought that a Beveridgean pension system redistributes income more than a Bismarckian one, since it ensures replacement ratios that decrease with income. We check the validity of this result when the fact that pension systems can redistribute also through their effects on labor income is taken into account. Labor market institutions turn out to be crucial. First we study an economy with a competitive labor market: quite surprisingly, inequality is unaffected by a reallocation of
more » ... a reallocation of funds towards the Beveridgean system. Then we introduce a minimum wage that creates unemployment on the unskilled labor market: in this case the Beveridgean system is proved to reduce inequality. . The author is very grateful to David de la Croix and Bruno Van der Linden; I wish to thank also Alessandra Casarico for useful suggestions. The usual disclaimer applies.
doi:10.2139/ssrn.542422 fatcat:lpoukr4svjdnjhnz6h5kfhiwyq