KDI Journal of Economic Policy

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P-ISSN 1738-656X

Vol.12, No.4

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한국개발연구. Vol. 12, No. 4, December 1990, pp. 113-126

https://doi.org/10.23895/kdijep.1991.12.4.113

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An Analysis of the Optimal Integration of Korea's Public Pension Schemes (Written in Korean)

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Abstract

With the introduction of the national pension, efficient integration of Korea's four public pension schemes has been discussed. The main point of such discussions is whether to have a progressive scheme or an income-proportional one. Under the assumption of a perfect labor market, it has been proved in the income tax literature that the regressive tax scheme with 0% tax rate to the most able person (person earning highest income) is pare to efficient, if there is an incentive problem in the labor supply. In this paper, a life-cycle model with a linear benefit schedule, when there is uncertainty about future earning ability, is studied. It is proved that the second best pension scheme is that having a progressive benefit schedule. This result implies that integration into a progressive pension scheme, like the current national pension, is required not only for efficiency but also for equity.

JEL Code

J30

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