2012年-IMF国际货币组织全球_A_Tradeoff_between_the_Output_and_Current_Account_Effects_of_Pension_Reform_24页_1mb

Summary of "A Tradeoff between the Output and Current Account Effects of Pension Reform"

Core Content

This working paper analyzes the long-term effects of pension reforms on output and the current account balance in a small open economy. It explores two types of reforms: increasing the retirement age and cutting pension benefits, and evaluates their impacts on the economy's fiscal sustainability, external balance, and growth prospects. The paper highlights the existence of a policy trade-off between these two objectives, showing that reforms that improve one often worsen the other.

Main Points

• Pension reforms are a critical tool for addressing fiscal sustainability and improving external balance in economies, especially those in the periphery of the euro area.
• The paper uses a dynamic general equilibrium model with overlapping generations, where households work, save, and retire, and firms produce a single good using labor and capital.
• The fiscal policy is characterized by a pay-as-you-go pension system, with taxes collected to fund public consumption, pension benefits, and government debt.
• The key trade-off is between output and the current account. Increasing the retirement age boosts output but has a small or negative effect on the current account. Conversely, cutting pension benefits improves the current account but reduces output.
• Mixed pension reforms, which both increase the retirement age and cut pension benefits, can simultaneously improve output and the current account balance.

Key Findings

• Reform I: Increasing the Retirement Age

  • Boosts labor supply and output due to higher working years and capital investment.
  • Leads to lower disposable income during retirement, as pension benefits are reduced and the labor skill profile declines with age.
  • Reduces the current account balance because of lower saving as a share of output and higher domestic investment.
  • The current account deteriorates due to the substitution effect of leisure and the decline in pension benefits.

• Reform II: Cutting Pension Benefits

  • Reduces pension expenditure and current account deficit.
  • Decreases labor supply and output, as the effective return on work effort falls.
  • Increases saving during working years, improving the current account.
  • The overall output declines, and the current account improves.

• Long-Run Tradeoff

  • For a given expenditure reduction target, there is a trade-off between output and the current account.
  • To increase the current account effect, the output effect must be reduced, which requires larger pension benefit cuts and shorter extensions of the working life.
  • The A-D curve illustrates this trade-off, showing that output increases with less current account improvement and vice versa.

• Welfare Implications

  • Reforms that increase the retirement age yield smaller welfare gains than those that cut pension benefits.
  • Welfare gains are measured by household utility levels in the stationary-transformed model.
  • The A-D curve shows that reforms with larger pension benefit cuts lead to higher welfare gains.

Parameter Values (Table 1)

Policy Implications

• The paper emphasizes that pension reforms should be carefully designed to balance output growth and external balance.
• Mixed reforms are more effective in achieving both objectives.
• The trade-off is more pronounced in economies with larger pension systems, where pension benefits are more generous relative to wage earnings.
• The effects of pension reforms can vary depending on the fiscal objective (e.g., expenditure reduction vs. tax rate reduction).
• The trade-off may be more sensitive in the short- and medium-term, especially when grandfathering arrangements or sequencing of fiscal targets are involved.

Conclusion

The paper concludes that pension reforms have a robust long-term trade-off between output and the current account balance, and that achieving a larger current account improvement requires a reduction in output growth. This trade-off is critical for policymakers aiming to balance fiscal sustainability and external sector stability in small open economies.