Beveridge versus Bismarck public-pension systems in integrated markets |
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Authors: | Martin Kolmar |
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Institution: | aUniversity of St. Gallen, Varnbüelstrasse 14, CH-9000 St. Gallen, Switzerland |
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Abstract: | The two basic systems according to which pay-as-you-go-financed public-pension systems can be organized are the (Anglo-Saxon) Beveridge system and the (continental) Bismarck system. An ideal Beveridge system provides flat-rate benefits, whereas an ideal Bismarck system provides earnings-related benefits. This paper analyzes the circumstances under which a Beveridge system can be sustainable in systems competition with a Bismarck system. The analysis reveals a much more complicated redistributive structure of the pension systems than only between high and low incomes. As a consequence, the sustainability depends on growth rates, and equilibria can exist where, contrary to the first intuition, even poor individuals prefer a Bismarck and rich individuals prefer a Beveridge system. |
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Keywords: | Market integration System competition Pension systems |
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