The Research of Income distribution Effect of the Extending Coverage of the Basic Pension Insurance System in China

Abstract

This paper uses a general equilibrium framework to establish a heterogeneity inter-temporal overlapping dynamic general equilibrium model of basic pension insurance system combining social pooling with personal accounts. Then it introduces the main content of Guo Fa [2005] No.38 and focuses on the income distribution and redistribution effects of the extending coverage of basic pension insurance system by policy simulation, parameter estimation, and sensitivity test. And it makes the theoretical derivation and empirical estimates. The results are shown as follows:firstly, the extending coverage of basic pension insurance system has significant income distribution and redistribution effects, and the redistribution effect is progressive, namely the income transformation from high earners represented by urban enterprise workers to low earners represented by flexible employees and migrant workers; secondly, personal accounts have played a smoothing role, which help to improve lifetime income distribution of different types of workers, but are not conducive to the improvement of income redistribution; thirdly, social pooling accounts have a strong income redistribution effect, which are in favor of income redistribution between different types of workers and narrow the income gap. Parameter sensitivity tests show that the conclusions are robust. Therefore, further optimization of social pooling accounts helps to reduce income inequality.