Who really benefits from pension systems? When life expectancy matters

Abstract

A growing empirical literature shows that life expectancy depends on the wage level. Using an overlapping generations model with a small open economy, we explain why this result modifies the redistributive properties of unfunded pension systems. We use the concept of "net contribution" to measure the redistributivity of pension systems. We show that pure Beveridgian pension systems remain redistributive. However, the poorest do not necessarily benefit the most from pension systems. For pure Bismarckian pension systems, net contributions are regressive. For mixed pension systems, it is possible to redistribute collected resources in favor of the ends of the distribution of wages.