Indexation and Inflationary Inertia: Brazil 1964-1985

Some governments facing high rates of inflation have adoptedwage and exchange rate indexation in an attempt to offset thecosts to workers and exporters. But indexation based on pastvalues of inflation is considered to be a powerful source ofcurrent and future inflation that undermines fiscal and monetarystringency designed to reduce inflation. Brazil indexed wagesand the exchange rate for more than twenty years, and we examineBrazilian evidence on these issues. We derive a transfer functionand estimate time-varying parameters to allow for the changesin indexing policy over the period. We find that the increasedfrequency of wage and exchange rate adjustment amplified theeffect of past inflation and made it less sensitive to monetaryand fiscal policies and more vulnerable to domestic agriculturalsupply shocks. Indexing did not eliminate the effectivenessof monetary policy, however, which retained a significant effectthroughout the indexation period.     

The Dynamics of Incomes and Occupational Pensions after Retirement

This paper uses two waves of the UK Retirement Survey to look at how incomes change during retirement. We concentrate on men aged 65–69 and women aged 60–69 in 1988–89 and look at how their incomes change over the following five years. Overall, we find a considerable degree of stability in real incomes. We use the panel data to look at the incomes of widows before and after they are widowed and find that, for this group of relatively young widows, their low incomes are in large part determined by the fact that it tends to be the relatively poorer husbands who die among this age-group. Finally, we consider the most important component of private income — occupational pensions — separately. We find a strong relationship between pension level and the probability of indexation — pensions that start low are less likely than higher pensions to keep up with inflation. JEL classification: D31, H55     

澳大利亚“安全和可持续”的国民养老金改革及启示

2009年9月澳大利亚政府颁布了＂安全和可持续＂的国民养老金改革计划。主要内容包括改革家计调查政策,提高国民养老金待遇水平,延长退休年龄,实施延长工作奖励计划等。这次改革对我国养老保障体系完善有如下启示：我国应当建立针对低收入群体的普惠制的国民养老金制度;以防止老年贫困,保障老年人最基本生活为目标;改革应注重政府调节和市场调节手段相结合;改革应兼顾不同群体利益,减少阻力。     

偿付能力、生命周期与养老金动态调整策略

本文从生命周期的角度,把养老保险基金的偿付能力作为内生变量,直接引入到养老金调整模型,使之能够自我反馈信息和修正预测偏差,并能根据偿付能力的变化对养老金进行动态调整,最终使养老保障能力与偿付能力实现了内在统一。情景分析表明:(1)在人口出生率和经济增速持续放缓的趋势下,如果不优化当前的养老金调整模式,偿付能力不足的程度将持续加剧;(2)与现行政策和现有模型相比,基于偿付能力构建的调整模型,能有效缓解偿付能力不足的程度,而且降低了养老金大幅波动的风险;(3)结合生命周期理论来调整养老金,不仅偿付能力的提升效果优于其它模式,而且延长了参保人员应对风险的时间,更加符合风险承受能力变化的生命周期特征,提高了抵抗风险的能力;(4)在制定延迟退休年龄等政策时,要综合考虑调整模式、养老金增长率和人口出生率等多方面因素,养老保险基金才可能持久地保持充足的偿付能力。     

养老金统筹层次提升的收入再分配效应研究——以辽宁省级统筹为例

养老保险一直以来被认为是具有重要的收入再分配功能.养老金公平分配既是收入再分配的出发点,也是再分配调节能力的基础.只有深入透彻的分析基础养老金自市级统筹提升到省级统筹层次带来的收入分配变动,才能更好检验基础养老金统筹层次提升所带来的地区间收入差距的变化,更重要的是可以为实现全国统筹铺平道路.本文立足于分析中国城镇企业职工基本养老保险制度,依据养老金计发办法,分析统筹层次提升对养老金给付影响及基础养老金的收入再分配效应,得到如下结论:省级统筹的实施对养老金给付水平的调整不存在影响;省级统筹的实施对新增退休人员基础养老金和过渡性养老金给付存在影响;养老保险统筹层次的提升缩小地区间的新增退休人员初次分配差异;对于新增退休人员来说,实际基础养老金地区差异要小于名义上的基础养老金地区差异.但当前的省级统筹层次提升分配方案损害了高收入地区高物价水平地区新增退休人员基础养老金福利,未能真正体现出保证劳动者在职贡献与养老金福利给付的相对公平.因此,养老保险统筹层次提升方案中,应充分考虑地区间物价水平差异,确保高收入地区养老金合理的流向低收入地区,保证基础养老金分配的公平与养老金制度的可持续发展,促进全国统筹的尽快实现.     

The Impact of DC Pension Systems on Population Dynamics

Abstract

This study investigates the risk inherent in defined contribution (DC) pension plans on an individual and aggregate basis, based on U.S. data. Our aim is to gain insight into the consequences of a DC pension scheme becoming the predominant pillar of retirement income for an entire society. Using the stochastic simulated output of a DC flexible age-of-retirement model, we first determine the optimal investment strategies. We then examine the demographic retirement dynamics of an entire population of DC pension plan participants.

We observe that even for the most risk-averse plan members there is a high level of uncertainty in an individual’s age at retirement. At the aggregate population level, we find that this uncertainty does not get dampened to any great extent by a diversification effect. Instead, the central role played by the market in determining retirement dates results in significant variation in the dependency ratio (the ratio of retirees to workers) over time. In addition, an attempt to ameliorate the outcome by introducing additional realistic features in the DC population modeling did little to dampen this volatility, which suggests that countries dominated by DC schemes of this type may, over time, be exposed to significant risk in the size of its labor force.     

退休人口再就业决策的影响因素研究 ——基于中国健康与养老追踪调查数据

夯实财富储备,改善劳动力有效供给是积极应对人口老龄化的重要措施。本文基于中国健康与养老追踪调查数据,全面考察了退休人口再就业的动因,着重分析享受养老待遇和养老待遇水平对退休人口再就业决策的影响。实证结果表明:享受养老待遇对退休人口再就业产生负激励效应;养老待遇水平提高会明显降低退休人口再就业的可能性;个人负债占资产比重越大,退休老年人再就业概率越高;配偶退休、年龄增大、健康状况差会显著降低退休人口再就业概率。对此,本文提出以下建议:适当延迟退休年龄,增加老年人口经济收入;养老保险制度应兼顾保障性和劳动力市场功能;构建老年就业服务体系,保障老年就业权利。     

Risk Allocation in Retirement Plans: A Better Solution

The corporate world is reconsidering the cost‐effectiveness of defined benefit pension plans while contemplating a change to defined contribution plans. This article begins by examining the three primary risks faced by sponsors of most DB pension plans—investment risk, interest rate risk, and longevity risk—and shows how shifting these risks to employees through a DC plan would affect both the corporation and the individual. Although DC plans clearly help companies manage risks, they provide at best an incomplete solution for individual participants. This article describes an innovation in pension design—the Retirement Shares Plan (RSP)—that combines many of the best features of DB and DC plans. An RSP provides:

• ? predictable and stable cost to the plan sponsor, with little chance of unfunded liabilities;
• ? lifetime income, guaranteeing that retirees will never outlive their benefits;
• ? a benefit accrual pattern comparable to that of traditional pension plans that preserves value for older, long‐service employees; and
• ? potential inflation protection for retirees.

The RSP accomplishes this by allocating risk to sponsors and individuals differently than either a traditional DB plan or a DC plan. Unlike most DB plans, the RSP shifts investment and interest rate risks from plan sponsors to participants. Unlike DC plans, the RSP keeps longevity risk with the sponsor.     

延迟退休年龄、内生生育率与养老金

本文通过构建内生生育率的OLG模型,从微观视角考察了延迟退休年龄对生育率、养老金替代率及其个人养老金收入的影响。研究表明:(1)延迟退休年龄会提高均衡时的生育率水平,但提高幅度非常有限。(2)生育率的提高会增加未来劳动力供给,促进养老金替代率上升和养老金收入增加,而延迟退休年龄延长了养老保险缴费期限,也会促进养老金替代率上升和养老金收入增加;但同时,延迟退休年龄将使得预防性储蓄下降,资本积累降低,工资收入下降,养老金收入降低。因此,延迟退休年龄会使养老金替代率上升。当资本产出弹性大于或等于0.5时,延迟退休年龄会使得养老金收入降低;当资本产出弹性小于0.5时,在平均预期寿命较大或养老保险缴费比例较高的情形下,养老金收入会随着退休年龄的延迟而增加,反之,其会随着退休年龄的延迟而降低。进一步地,将模型拓展到包含人力资本的情形,延迟退休年龄仍会提高均衡时的生育率与养老金替代率。     

Keeping up or Falling behind? The Impact of Benefit and Tax Uprating on Incomes and Poverty*

Each year, the government decides how much to raise benefits and tax allowances. In the UK, the basis for these upratings is rarely debated, yet has major long‐term consequences for the relative living standards of different groups as well as for the public finances. This paper considers the medium‐term implications of present uprating policies, which vary across parameters of the tax–benefit system. Continuing these policies for 20 years, other things staying the same, would result in a near doubling of the child poverty rate alongside a substantial gain to the public finances. At the same time, pensioners are largely protected by the earnings indexation of pensioner benefits including, in time, the basic state pension. We show how difficult it will be to meet the UK child poverty targets unless the greater inequality inherent in the current regime for uprating payments and allowances is redressed.     

Ambiguity aversion and the absence of wage indexation

This paper analyzes optimal wage contracting assuming agents are not subjective expected utility maximizers but are, instead, ambiguity (or uncertainty) averse decision makers who maximize Choquet expected utility. We show that such agents will choose not to include any indexation coverage in their wage contracts even when inflation is uncertain, unless the perceived inflation uncertainty is high enough. Significantly, the exercise does not presume any exogenous costs (e.g., transactions costs) of including indexation links.     

Ageing and the tax implied in public pension schemes: simulations for selected OECD countries

A key figure suited to measuring intergenerational imbalances in unfunded public pension schemes is given by the ‘implicit tax rate’ imposed on each generation's lifetime income. The implicit tax arises from the fact that, quite generally, pension benefits fall short of actuarial returns to contributions paid to these systems while actively working. Under current pension policies, implicit tax rates will increase sharply for younger generations in most industrialised countries. In this paper, this is illustrated for the cases of France, Germany, Italy, Japan, Sweden, the UK and the USA. Nevertheless, there are remarkable differences across countries regarding both the level of implicit taxes and their development over successive age cohorts, which can be attributed to differences in ageing processes and in the institutional features of national pension systems. In addition, we can demonstrate how effective different approaches to pension reform are in smoothing the intergenerational profile of implicit tax rates.     

The Determinants of Household Saving in China: A Dynamic Panel Analysis of Provincial Data

In this paper, we conduct a dynamic panel analysis of the determinants of the household saving rate in China using a life cycle model and panel data on Chinese provinces for the 1995–2004 period from China's household survey. We find that China's household saving rate has been high and rising and that the main determinants of variations over time and over space therein are the lagged saving rate, the income growth rate, (in many cases) the real interest rate, and (in some cases) the inflation rate. However, we find that the variables relating to the age structure of the population have the expected impact on the household saving rate in only one of the four samples. These results provide mixed support for the life cycle hypothesis as well as the permanent income hypothesis, are consistent with the existence of inertia or persistence, and imply that China's household saving rate will remain high for some time to come.     

Public Pension Reform in the United Kingdom: What Effect on the Financial Well‐Being of Current and Future Pensioners?*

Unlike many tax and benefit changes, reforms to public pension programmes take many years to have their full effect. This paper examines the effect of reforms to the public pension programme in the United Kingdom on the state retirement incomes of current generations of pensioners and on the prospective state incomes of future generations of pensioners. We show that, for an individual with lifetime earnings close to male average earnings, the UK pension system is at its most generous to those reaching the state pension age around the year 2000, but that the introduction of the state second pension and the pension credit postpones this peak for individuals on lower incomes and for those with substantial periods out of paid employment spent with caring responsibilities. We also consider how the ‘mix’ of benefits, particularly between the contributory and income‐tested sectors, could change over time, and the impact that this would have on incentives to save for retirement.     

Measuring the Impact of Longevity Risk on Pension Systems: The Case of Italy

This article estimates the impact of longevity risk on pension systems by combining the prediction based on a Lee-Carter mortality model with the projected pension payments for different cohorts of retirees. We measure longevity risk by the difference between the upper bound of the total old-age pension expense and its mean estimate. This difference is as high as 4% of annual GDP over the period 2040–2050. The impact of longevity risk is sizeably reduced, but not fully eliminated, by the introduction of indexation of retirement age to expected life at retirement. Our evidence speaks in favor of a market for longevity risk and calls for a closer scrutiny of the potential redistributive effects of longevity risk.     

After the death of inflation: will fiscal drag survive?

Declining inflation rates might have negative consequences for tax revenues. Phenomena such as the inflationary bracket creep in a progressive income tax system do not work any longer. With this background, the paper analyses the extent of fiscal drag for OECD countries since 1965. Some consideration of the role of money illusion and indexation in this context lays the theoretical base. A framework is presented that allows for the classification of fiscal structures with regard to the type of fiscal drag. The subsequent econometric panel analysis is performed for total and disaggregated government revenues. The results back theoretical considerations of inflation's impact on different kinds of taxes, which tends to be positive for individual income taxes and social security contributions and is negative for corporate income taxation. The paper concludes that both declining inflation and changing tax structures limit the potential for future fiscal drag.     

How the provision of inflation information affects pension contributions: A field experiment

Ignoring the effects of inflation in retirement planning can have severe consequences for an individual's future financial well-being. Yet, many pension funds do not communicate inflation-related information, presumably for the fear of reduced contributions once the members understand how low the “real” return on saving for retirement is. As an alternative prediction, the provision of inflation information could increase pension contributions, because it reveals possible pension shortfalls. In cooperation with a major German pension fund, we conduct a field experiment, in which we vary the inflation information provided to the fund members, to explore this important issue. Among all participants, we find mostly positive but insignificant effects of the inflation information on pension contributions. Among those participants who voluntarily changed their pension contributions after the experimental intervention, the provision of inflation information significantly raises the likelihood of increasing pension contributions.     

How Robust Are Popular Models of Nominal Frictions?

We consider alternative combinations of nominal price and wage frictions in dynamic stochastic general equilibrium models fit to U.S. data. Since inflation was unanchored in the 1970s, we divide the data into early, middle, and late samples (1955–68, 1969–79, and 1983–2007, respectively). We find that prices are reoptimized more frequently and exhibit greater indexation to past inflation in the middle sample than in the other two samples, while wages are reoptimized with increasing frequency and display less evidence of indexation over time. Differences in price and wage setting across samples have important implications for the economy's response to key shocks.     

Expectations, learning and macroeconomic persistence

Monetary DGSE models under rational expectations typically require large degrees of features as habit formation in consumption and inflation indexation to match the inertia of macroeconomic variables.This paper presents an estimated model that departs from rational expectations and nests learning by economic agents, habits, and indexation. Bayesian methods facilitate the joint estimation of the learning gain coefficient together with the ‘deep’ parameters of the economy.The empirical results show that when learning replaces rational expectations, the estimated degrees of habits and indexation drop closer to zero, suggesting that persistence arises in the model economy mainly from expectations and learning.     

Financial fairness and conditional indexation

Collective pension contracts can generate advantages for their participants by implementing forms of risk sharing. To ensure the continuity of a collective scheme, it has to be monitored whether the contracts offered to participants are financially fair in terms of their market value. When risk sharing is implemented by means of optionalities such as conditional indexation, the analysis of financial fairness is not straightforward. In this paper, we use a stylised overlapping generations model to study financial fairness for a conditional indexation scheme. We find that financial fairness for all participants at all times is not feasible within a scheme of this type, unless the nature of indexation is such that the scheme is reduced to DC. However, financial fairness for incoming generations at the moment of entry can be realised. We show how to compute the fair contribution rate as a function of the current nominal asset/liability ratio for a given level of nominal entitlements. At low levels of the ratio, the fair contribution for incoming generations is also relatively low; nevertheless, the joining of a new generation still has a positive effect on the asset/liability ratio.