DP463 | Undesirable Redistributions in the Retirement-Public Pension Schemes: The Italian Case Study

Publication Date

01/09/1990

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Abstract

This paper uses comparative statistics in a simple three-period overlapping generations model to show that any pay-as-you-go mechanism for public retirement pensions, when adopted in a dualistic economic system, penalises the most dynamic demographic groups, i.e., the <MI>developing<D> rather than the developed labour markets, irrespective of their welfare level. Taking into account the fact that (net) natality growth rate is usually negatively correlated to family wealth, and that the rates of increase in real wages and employment are usually higher in the developing sub-sectors of an economic system, we argue that social security tends to lead to distortionary inter-intracohort redistributions within non- homogeneous countries. We show that the Italian case study, which compares the contributions/retirement pensions ratio of the poorer but more rapidly growing Mezzogiorno with that of the wealthier but more stationary North-Centre, provides support for this theoretical model.