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Pension Funding In A Unionized Economy

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  • Antonis Adam
  • Thomas Moutos

Abstract

This paper analyzes the effects of pension funding for a small open economy in which wages are subject to bargaining. Using an overlapping‐generations framework, we show that a reform away from a Pay‐As‐You‐Go towards a funded pension system will be Pareto improving only if the reform results in a reduction in the steady‐state unemployment rate. However, the reduction in the unemployment rate is by no means warranted: although for pension systems which involve a limited amount of intra‐generational redistribution this is likely, for systems displaying a high degree of intra‐generational redistribution the unemployment rate may well rise thus preventing the realization of welfare gains.

Suggested Citation

  • Antonis Adam & Thomas Moutos, 2009. "Pension Funding In A Unionized Economy," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(2), pages 213-231, May.
    • Handle: RePEc:bla:scotjp:v:56:y:2009:i:2:p:213-231
    DOI: 10.1111/j.1467-9485.2009.00481.x
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