How much is transfer and how much is insurance in a pay-as-you-go system? The German case

Pay-as-you-go pension systems provide insurance against longevity-related o ld-age poverty and related risks. They are commonly also used as instrument s for redistribution. This paper provides several estimates of the insuranc e and transfer share of the German public pension system. Estimating these shares is important because they are indicative of taxation-related deadwei ght losses and influence public acceptance of the pension system. We also d isentangle intragenerational from intergenerational transfers. Although our estimate of intragenerational transfers is smaller than recent semi-offici al estimations, such transfers create substantial deadweight losses. Interg enerational transfers are much larger, thereby contributing to strong negat ive participation incentives for the younger generation.