The impact of pension reforms on intergenerational equity in France

Transcription

1 The impact of pension reforms on intergenerational equity in France Xavier Chojnicki, Université de Lille Julien Navaux, Université Paris Dauphine, Paris School of Economics Lionel Ragot, Université Paris-Ouest-Nanterre-La-Défense, CEPII Global NTA Workshop, June 21 24, 2016, Saly, Senegal

2 Ratio Public transfer inflows 4,0 3,5 3,0 3,2 Ratios of public transfers inflows 60+/25-59 and 0-24/25-59 Per capita - France ,9 3,1 3,2 3,3 3,2 3,1 2,5 2,0 1,5 1,4 1,3 1,3 1,4 1,5 1,4 1,3 60+/ / ,0 0,5 0,0 Year Source: d Albis & Navaux, 2016

3 Issue Share of public transfers received by each age group France yo 35.5% 31.1% 28.8% 26.1% yo 28.8% 30.4% 29.4% 29.0% 60 yo % 38.5% 41.8% 44.9% + 9 pts

4 Issues Pension reforms of the PAYG system in France: Balladur Fillon Woerth Ayrault replacement rate retirement age contribution rate

5 Issues Two issues: What will be the allocation of public transfer inflows among age groups up to 2060? What are the impacts of previous pension reforms on intergenerational equity?

6 Outline MELETE : An OLG model Calibrations 4 scenarios Intergenerational equity indicators Results Conclusion

7 Outline MELETE : An OLG model Calibrations 4 scenarios Intergenerational equity indicators Results Conclusion

8 MELETE : An OLG model General equilibrium in a closed economy (Auerbach & Kotlikoff, 1987) OLG: includes the age structure of the population and the effects of reforms on intergenerational redistribution Intertemporal: Includes intertemporal choices over the life cycle (savings, education ) Computable: quantify the effects of population ageing and consider several scenarios of reforms

9 MELETE : An OLG model Socio-demographic unit: four young cohorts and sixteen adult cohorts: 0-4 yo up to 95 yo + three skill levels: low-skill (LS), medium-skill (MS) and high-skill (HS) Labor supply: Participation rate by age and by skill level (INSEE) Imperfect substitution between workers: wages depend the amount of work, experience & education The age of entry on the labor market is endogenous: individuals choose their skill level by a cost-benefit analyses Retirement depend on the participation rate by age and by skill level and on the retirement age Pensions are calculated on average annual wages of the 25 best years

10 Outline MELETE : An OLG model Calibrations 4 scenarios Intergenerational equity indicators Results Conclusion

11 Calibrations Population: INSEE (Blanpain et Chardon, 2010) Fertility rate: 1.95% Net migration: 100,000 people Share of people aged 60+: 26% in 2010 / 45% in 2060 Growth and productivity: Scenario C of the COR (COR, 2015) GDP: 1.3%, / 1.6%, / 1.1%, NTA age profiles by skill level: Public transfer inflows: pensions, public health consumption, public education consumption, family benefits, Unemployment benefits, Solidarity incomes (RSA), housing benefits Public transfer outflows: VAT, IRPP, social security contributions Inheritances

12 Calibrations ,9 8,5 5,5 Ratios of public transfers inflows 60+/25-59 Per capita - France ,8 7,5 7,0 7,1 7,1 6,9 5,0 5,1 6,7 5,4 6,9 5,7 6,9 6,9 6,5 6,5 3,1 3,0 3,1 3,2 3,3 3,2 3,1 5,1 4,9 MELETE NTA (3) NTA (2) NTA (1)

13 Outline MELETE : An OLG model Calibrations 4 scenarios Intergenerational equity indicators Results Conclusion

14 4 scenarios A central scenario, based on the reforms implemented 3 scenarios: what happens if the cost of population ageing is only based on: Replacement rate? Retirement age? Contribution rate?

15 Outline MELETE : An OLG model Calibrations 4 scenarios Intergenerational equity indicators Results Conclusion

16 Intergenerational equity indicators 3 most common indicators (Blanchet, 1998, 2010 ; Bonnet, 2014) + choose a criterion for each indicator Indicator 1: Compare age groups Criterion: Stability of the relative situation of each age group Indicator 2: Compare the standard of living of several generations at the same age Criterion: Each generation improves its position with respect to the previous generation at the same age Indicator 3: Compare the balance sheet of several generations over the entire life cycle Criterion: Each generation must receive more than its contribution

17 Outline MELETE : An OLG model Calibrations 4 scenarios Intergenerational equity indicators Results Conclusion

18 Results Indicator 1: Ratios of public transfers inflows 60+ / Per capita ,9 8,0 6,5 5,9 6,2 Central scenario Replacement rate scenario Contribution rate scenario Retirement age scenario Year

19 Constant thousand euros Results Indicator 2: Cohort profiles - disposable income Central scenario C C 1990 C 1970 C 1980 C C C 1950 C C Age

20 Constant thousand euros Results 90 Contribution rate scenario 90 Replacement rate scenario 90 Retirement age scenario C C C C C C C 2000 C C C C C C 1970 C 1970 C C 1970 C1960 C 1950 C 1940 C C 1950 C 1960 C C 1950 C 1940 C C Age Age Age

21 Results Cover needs related to ageing 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Replacement rate Retirement age Contribution rate Unmet need

22 Results Indicator 3: Recovery rate 450% 400% 350% 300% 250% 200% 150% 100% 50% 0% Central scenario Replacement rate scenario Contribution rate scenario Retirement age scenario Birth cohort

23 Outline MELETE : An OLG model Calibrations 4 scenarios Intergenerational equity indicators Results Conclusion

24 Conclusion Academic contribution: Bridge between NTA and OLG models US: Lee et al., 2015 Spain: Paxtot et al., 2016 Canada: Georges et al., 2011, 2015 Nigeria: Olaniyan et al., 2015 France: Our contribution Empirical contribution: Free lunch inherent to the PAYG system Public transfer inflows: ratio 60+/25-59 decreases slightly Disposable income: from one generation to another for the young generations between working life and retirement