Scandinavian Working Papers in Economics

Umeå Economic Studies,
Umeå University, Department of Economics

No 1030: Public pensions in the age of automation

Johan Gustafsson () and Gauthier Lanot ()
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Johan Gustafsson: Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S 901 87 Umeå, Sweden
Gauthier Lanot: Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S 901 87 Umeå, Sweden

Abstract: We analyze the impact of improved automation on the size and distribution of pension benefits, and on the optimal size of public pension systems. To this end, we build an overlapping generations model with heterogeneous agents. Automation is either conceptualized in a capital-skill complementarity (CSC) or task-based (TB) fashion. We find that any productivity gains of automation realized as increased returns to savings disproportionately benefit high-skilled workers who are less dependent on illiquid public pensions. A redistributive pension system can reduce public pension inequality but increase inequality in private retirement savings. The optimal size of the pension system is larger in the TB specification where displacement effects of automation are accounted for. We do not find that automation-driven growth warrants any change to the optimal size of the public pension system.

Keywords: Automation; General Equilibrium; Overlapping Generations; Public Pensions

JEL-codes: H55; J22; J26

Language: English

40 pages, November 26, 2024

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