THE CASE FOR PAY-AS-YOU-GO PENSIONS IN A SERVICE ECONOMY

The elderly consume more labour‐intensive services than young individuals. This makes them vulnerable to rising costs of services due to higher wages, which can be caused by increased capital accumulation. This paper shows that in a model with a service sector, the golden‐rule capital stock is lower and dynamic inefficiency is more likely to occur than in the conventional one‐sector model. This implies that in many cases, a positive Pay‐As‐You‐Go tax maximises long‐run welfare in a service economy. Calculations based on data from the United Kingdom and the Netherlands show that the long‐run optimal degree of funding coincides with the current situation in these countries.     

THE TREATMENT OF PENSIONS AND INSURANCE IN NATIONAL ACCOUNTS*

In the course of the nearly two decades since the revised SNA was developed, the role of pensions and insurance in the developed western economies has been significantly altered. The United Nations System of National Accounts (SNA) is not fully consistent in its treatment of pension and insurance transactions. This paper examines whether, in view of the changed institutional context, a modification of the SNA treatment of this complex of flows would be desirable. It investigates the impact on household income and saving of adopting a somewhat more consistent transactor/transaction approach for all pension and insurance transactions. Four main topics are covered: (1) social security, (2) private pensions, (3) life insurance, and (4) casualty insurance. Each is considered in terms of the treatment of contributions, the treatment of benefits, and the handling of reserves and the income generated by them. The same sorts of problem arise in all four cases.     

THE GENDER GAP IN PRIVATE PENSIONS

In many western countries, older women receive considerably less private pension income than older men on average. We analyse this differential in Britain, examining differences between the sexes both in private pension coverage and in pension income conditional on receipt. Using regression‐based decompositions, we show that both gender gaps are associated mainly with differences in returns to personal characteristics rather than with differences in personal characteristics per se.     

ECONOMIC DEVELOPMENT UNDER ALTERNATIVE TRADE REGIMES*

How does openness affect economic development? This question is answered in the context of a dynamic general equilibrium model of the world economy, where countries have technological differences that are both sector neutral and specific to the investment goods sector. Relative to a benchmark case of trade in credit markets only, consider (i) a complete restriction of trade and (ii) a full liberalization of trade. The first change decreases the cross‐sectional dispersion of incomes only slightly, and produces a relatively small welfare loss. The second change, instead, decreases dispersion by a significant amount, and produces a very large welfare gain.     

THE REDISTRIBUTIVE IMPACT OF ALTERNATIVE INCOME MAINTENANCE SCHEMES: A MICROSIMULATION STUDY USING SWISS DATA

Taking a benchmark scenario, the current situation in Switzerland, and using a microsimulation technique, we compare the effectiveness of various income maintenance schemes for reducing inequality and poverty. A full negative income tax allowance designed to eliminate poverty is shown to reduce income inequality most drastically. An integrated federal linear tax rate of 62 percent is required to make it viable. Aggregate work hours are reduced by approximately 10 percent and average disposable income falls by 9.3 percent under such circumstances. A participation income restricted to adults in employment and covering 50 percent of subsistence costs is however shown to result in an unambiguous social welfare improvement over the current situation in Switzerland.     

FINANCIAL CONSISTENCY IN LONGITUDINAL MICROSIMULATION: HOMEMAKER PENSIONS RE-EXAMINED

Transfer programs, including public pension plans, do not generate wealth. In this paper methods of distributional analysis that lack budget constraints and are prone to illusions of wealth creation are criticized. A microsimulation analysis reported in "Homemaker Pension and Lifetime Redistribution" (Wolfson, 1988) is repeated using a conceptual framework that imposes a balance between the positive and negative impacts of transfer programs. This alternate analytical perspective reverses the distributional conclusions of the earlier study conducted using the same model.     

OCCUPATIONAL PENSIONS, WAGES, AND JOB MOBILITY IN GERMANY

Pension‐covered workers in Germany are three times less likely to change jobs than workers not covered by an occupational pension scheme. This paper examines the effects of occupational pension coverage and pension portability loss on voluntary job changes using a sample selection model with endogenous switching. The model estimates, derived from western German panel data for 1985–1998, indicate that occupational pension coverage reduces worker mobility by imposing a capital loss on those leaving their job before retirement age. Moreover, pension‐covered workers receive a higher compensation, which discourages mobility. Making pensions portable increases mobility, but from a low initial level.