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China and Global Development Seminar Series

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School of Business

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Institute for China and Global Development

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jointly present

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Sharing High Growth Across Generations: Pensions and Demographic Transition in China

with Zheng Song, Kjetil Storesletten and Yikai Wang


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by Professor Fabrizio Zilibotti

Chair of Macroeconomics and Political Economy of

the Department of Economics

at the University of Zurich

 

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June 12, 2012 (Tuesday)

11:30 a.m. to 1:00 p.m.

 

Room 910, KKL Building

The University of Hong Kong

Pokfulam Road, Hong Kong

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To view Prof. Zilibotti's presentation slides, please click here.

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Remarks:  Non-HKU staff/students who are interested in attending this seminar, please register with Ms. Noelle Keung by sending your full name, affiliation and contact details to info@hiebs.hku.hk.  For enquiries, please call 2547 8472. 

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Abstract

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A major dilemma facing China is the extent to which the benefits of high growth can be shared more equally within and across cohorts. China will experience a sharp increase in the old-age dependency ratio which may undermine the sustainability of its pension system, arguably the most important institutional vehicle of inter-generational redistribution. In this paper, we analyze the welfare effects of alternative reforms of the Chinese pension system, with the aid of a dynamic general equilibrium model which incorporates the salient structural factors, namely, the population dynamics (including internal migration) and productivity growth. We show that the current system is unbalanced and that either higher taxes or lower benefits are necessary to restore its intertemporal balance. However, delaying such a reform by a few decades has a major positive impact on the welfare of (poorer) workers retiring in the next few years, and imposes only a small additional cost on (richer) future generations. In contrast, a fully funded reform has negative welfare implications on the earlier generations, and yields small gains to the generations retiring in the far future. The high wage growth predicted by our model is key for these normative results.

 

About the Speaker  

A former Professor of Economics at University College London and at the Institute of International Economic Studies in Stockholm, Fabrizio Zilibotti currently holds the Chair of Macroeconomics and Political Economy of the Department of Economics at the University of Zurich. He is a joint recipient of the Yrjo Jahnsson award 2009 from the European Economic Association. He is the main editor of the Journal of the European Economic Association, a former director and managing editor of the Review of Economic Studies, and an Associate Editor of the Journal of Economic Growth. He is the Principal Investigator of an ERC Advanced Grant. He is a director of the NBER Economic Fluctuations Group on Income Distribution and Macroeconomics. He is a Fellow of the Econometric Society, CEPR and CESifo. His research interests include economic growth and development, political economy, macroeconomics, financial economics, and industrial organization. He has published (or forthcoming) papers in the American Economic Review, Econometrica, Journal of Political Economy, Quarterly Journal of Economics, Economic Journal, European Economic Review, International Economic Review, Journal of Monetary Economics, Journal of Economic Theory, Journal of Economic Growth, Journal of the European Economic Association.

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