A Study On Redistributive Effect Of China's Pension System

It's very important to identify the income redistributive effects of different pension systems, which have not got complete and sufficient study theoretically yet. Does a Pay-as-You-Go pension system imply a strong role in income redistribution while a fully funded pension system has nothing to do with income redistribution? The answer depends not only on the kind of system itself, but also on the design of institution and the macroeconomic situation.In practice, the redistirbutive effect of China's current pension system has not got study all the while, which has been ignored too in the current debate about pension reform.The redistributive character of a pension system decides its political support and sustainability. Because of the large extent of income redistribution under pension system, combined with the inevitable reexamination of the long-run funancial solvency of pensions, an explicit recogniton of the immense redistributive effect of pension system would be an important input into decisons concerning future reforms of our current pension system.In this dissertation, the author establishes a simple overlapping generation model to analyze the redistributive effects of two basic pension systems, pay-as-you-go pension system and fully funded system, completely and sufficiently in theory. The author then judges the degree of income redistribution under China's current pension system based on the above theoretical analysis. Further, the author studies how much income redistribution the current pension system fosters in China empirically, using a microsimulation method. The author also investigates how several proposed pension reforms, including increasing the retirement age, increasing the payroll tax and decreasing the overall benefit level, affect income redistribution within the China's pension system.This study on the empirical analysis of the redistributive effect of China's current pension system would provide a case of the relevant studies about China's pension system and be a reference to further study.