Two major social security systems are compared: the funded sys tem and the pay-as-you-go system. In the funded system premiums are set to equalize the present expected value of benefits and the present expected value of premiums. In the pay-as-you-go system each person supports a portion of the cost of maintaining the retired population in return for which future generations will support him during his retirement. It is shown that in a growing economy which needs capital accumulation to reach the steady-state path of the capital stock, a pay-as-you-go system may not he optimum because it can inhibit the process of capital accumulation. Although the paper is fundamentally theoretical, a very simple empirical test is performed with information from the Argentinean social security system for the period 1950 - 1973.
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Article provided by Instituto de Economía. Pontificia Universidad Católica de Chile. in its journal Cuadernos de Economía.
Volume (Year): 17 (1980) Issue (Month): 50 () Pages: 113-126 Download reference. The following formats are available: HTML,
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