Pension Reform in Brazil: Transitional Issues in a Model with Endogenous Labor Supply

Abstract

Brazilian PAYG system has been under financial stress and needs to be reformed. A com- putational general equilibrium model with 55 overlapping generations is used to simulate macroeconomic and welfare impacts of alternative social security reforms. Transition turns out to have quite different redistributional effects for the generations involved de- pending on which tax is used to finance it. There is no unanimity about which transitional tax path maximizes individual welfare. I study potential voting results if generations choose between the PAYG and a set of transitional schemes.