Distributional Effects of Social Security Reforms: the Case of France

Raquel Fonseca () and Thepthida Sopraseuth

Cahiers de recherche from Chaire de recherche Industrielle Alliance sur les enjeux économiques des changements démographiques

Abstract: This paper uses a calibrated dynamic life-cycle model to quantify the long-run distributional impact of two opposite Social Security reforms: modifying the parameters of a defined benefit (DB) plan (such as in France with Ayrault’s reform) or switching to a notional defined contribution (NDC) plan (such as in Italy). Both reforms yield an inequal distribution of welfare losses. Low-skilled workers are the main losers of the reforms. This is so for different reasons in each reform. In the case of Ayrault’s reform, low-skilled individuals delay retirement by 2 years, up to age 62. In switching to a NDC scheme, low-skilled workers’pensions fall substantially. In NDC schemes, inequalities along the working-life are directly translated into inequalities in pension levels. The switch from a DB plan to the Italian reform yields substantial welfare losses, pensions drastically fall, and individuals save more. Since low-skilled workers do not save as much as middle or high-skilled workers, the switch to NDC schemes leads to a more unequal society in terms of asset distribution.

Keywords: Pension reforms; life-cycle heterogeneous-agent model; distributional effects (search for similar items in EconPapers)
JEL-codes: E24 H31 H55 J26 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-age, nep-dem, nep-dge, nep-eec, nep-mac, nep-pbe and nep-pub
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https://www.cedia.ca/sites/cedia.ca/files/cahier_15-15_distib_effect.pdf (application/pdf)

Related works:
Journal Article: Distributional effects of social security reforms: The case of France (2019)
Journal Article: Distributional effects of social security reforms: The case of France (2019)
Working Paper: Distributional Effects of Social Security Reforms: the Case of France (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:lvl:criacr:1515

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