Abstract
This paper shows that in a two-country two-overlapping-generations model with migration, capital mobility and an immobile production factor (land), a locally welfare-improving pension reform at the cost of the neighboring country is possible if land plays a minor role in production. Furthermore, differences in the size of the PAYG pension schemes between the countries distort the international allocation of labour and capital. As a result, a Pareto-improving pension reform is possible if countries employ PAYG pension schemes of different size, provided that a federal government exists that redistributes benefits and losses of the reform both intergenerationally and internationally.
Original language | English |
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Pages (from-to) | 431-450 |
Journal | International Economics and Economic Policy |
Volume | 11 |
Issue number | 3 |
Early online date | 27 Sept 2013 |
DOIs | |
Publication status | Published - Sept 2014 |