Increased longevity and social security reform : questioning the optimality of individual accounts when education matters

Gilles Le Garrec (1)

1 OFCE - Observatoire français des conjonctures économiques (Sciences Po)

In many European countries, population aging had led to debate about a switch from conventional unfunded public pension systems to notional sys- tems characterized by individual accounts. In this article, we develop an overlapping generations model in which endogenous growth is based on an accumulation of knowledge driven by the proportion of skilled workers and by the time they have spent in training. In such a framework, we show that conventional pension systems, contrary to notional systems, can enhance eco- nomic growth by linking bene…ts only to the partial earnings history. Thus, to ensure economic growth, the optimal adjustment to increased longevity could consist in increasing the size of existing retirement systems rather than switching to notional systems.

Keywords: social security; intertemporal choice; human capital

Domains: Economics and Finance

Gilles Le Garrec. Increased longevity and social security reform : questioning the optimality of individual accounts when education matters. 2014. ⟨hal-03460313⟩