The Impact of Introducing a Pension Sustainability Factor on Inequality and Growth

Miguel Sanchez-Romero , Vienna Institute of Demography
Philip Schuster, Oesterreichische Nationalbank
Alexia Fuernkranz-Prskawetz, Vienna University of Technology

We implement an overlapping generations model in which heterogeneous individuals optimally choose the number of years of education, health investment, consumption path, and labor supply. Vital rates (mortality and fertility) are assumed to depend on the level of education. To account for economic and demographic heterogeneity within each cohort, we assume individuals differ according to their learning ability, initial health deficits, and disutility from the effort of attending schooling. The results are based on counterfactual experiments run for Austria, in which we analyze the effect that a sustainability factors may have on inequality and growth.

See extended abstract

 Presented in Session 38. Ageing and Retirement