Delayed retirement, pension insurance and income inequality

Abstract

Purpose

To investigate the potential of raising the retirement age and reforming pension insurance in mitigating intra- and inter-generational income inequality, thereby offering empirical support for governmental policy formulation.

Design/methodology/approach

A dynamic general equilibrium model with intertemporal iteration is developed to comprehensively assess the impact of policies raising the retirement age on income inequality, taking into account delayed retirement, survival probability, and pension insurance. The theoretical hypotheses are validated through simulation using MATLAB.

Findings

Through theoretical analysis, it is determined that, given certain assumptions are satisfied, raising the retirement age can effectively mitigate intra-generational income inequality, inter-generational income inequality under both the pay-as-you-go and fund accumulation systems. Simulation results indicate that, under current parameter settings, raising the retirement age can reduce the Gini coefficient. Furthermore, this study reveals that regardless of the pay-as-you-go or fund accumulation system, pension insurance serves as a mechanism for income redistribution and alleviating income inequality.

Originality/value

It offers a theoretical foundation for the government's policy on delayed retirement and endowment insurance.

Citation

Zhang, Q. and Cao, X. (2024), "Delayed retirement, pension insurance and income inequality", Kybernetes, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/K-10-2023-2034