Pension reforms in france: Impact on growth and inter-generational redistributive effects

Abstract

This paper assesses the impact on growth and the inter-generational redistributive effects of some possible pension reforms in France using a dynamic general equilibrium model with overlapping generations. Results suggest that a reform increasing the effective average retirement age by 1.25 years per decade and diminishing the average replacement rate by around 6 percentage points up to 2020 could stabilise social contributions for the youngest, but would gradually foster the poverty rate among pensioners. On the other hand, a reform incorporating a rise in the age of retirement by 1.25 years per decade, unchanged replacement rates and a discretionary increase of all pensions of 2.5 per cent in 2008 would limit the poverty rate among pensioners, but it would weigh down on the growth rate and the welfare of future generations. © 2009 The International Association for the Study of Insurance Economics.