Reform of the Canada Pension Plan: Analytical Considerations
IMF Working Papers, October 1, 1997
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- Reform of the Canada Pension Plan: Analytical Considerations
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Bibliographic details
- Authors: Charles Frederick Kramer, Yutong Li
- Published: October 1, 1997
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451928327.001
Authors and publication
- By Charles Frederick Kramer, Yutong Li
- October 1, 1997
- IMF Working Papers, Working Paper No. 1997/141
- Volume: 1997; Issue: 141; Pages: 30
- DOI: https://doi.org/10.5089/9781451928327.001
- Stock No: WPIEA1411997
- ISBN: 9781451928327
- ISSN: 1018-5941
Research context and approach
- Uses a stylized model of the Canadian economy to illustrate general-equilibrium effects of pay-as-you-go (PAYG) public pension systems.
- Focuses on how a PAYG public pension system affects economic behavior, relative prices, and macroeconomic aggregates, and on implications for pension reform design.
Core findings
- Introducing a PAYG public pension system can:
- Reduce aggregate saving.
- Reduce income.
- Reduce wages.
- Increase interest rates.
- A significant portion of the distortion arises because benefits are not explicitly linked to contributions.
- Creating an explicit linkage between benefits and contributions can reduce the distortions associated with the wage tax that funds plan contributions.
Thematic subjects and keywords
- Subjects: Aging, Income, Labor, National accounts, Pensions, Population and demographics, Retirement, Wages
- Keywords: Aging, applied general equilibrium, contribution rate, earnings record, Income, interest rate r, labor, Pensions, public pensions, rate of return, replacement rate, Retirement, wage, wage earnings, wage growth, wage income, wage W, Wages, WP
Implications for pension reform
- Reforms that alter the linkage between contributions and benefits can materially affect macroeconomic distortions caused by PAYG financing.
- Policy design should account for general-equilibrium feedbacks: effects on saving, wages, income, and interest rates when assessing reform options.
Source: IMF Working Paper "Reform of the Canada Pension Plan: Analytical Considerations" (1997/141).
Content in this bundle
- Reform of the Canada Pension Plan: Analytical Considerations - WP/97/.141