Funded Pensions and Unemployment

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Funded Pensions and Unemployment

Author Info

Roland Demmel
Christian Keuschnigg

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Christian Keuschnigg

Abstract

Pay-as-you-go (PAYG) pension schemes are becoming increasingly unsustainable in the face of drastic population aging. Simultaneously, the contribution rates may aggravate an already serious unemployment problem. A regime switch to a funded system could help to alleviate the unemployment problem in addition to restoring sustainability of social security. This paper asks how the transition to a partially funded system is implemented such that all generations may share in the efficiency gains from lower unemployment. We propose a welfare based transition scheme that cuts contributions to the PAYG system and uses public debt to compensate old generations for their previously acquired pension claims. Relying on an overlapping generations framework with union wage setting, we show that this reform reduces unemployment, boosts capital accumulation and yields welfare gains to present and future generations.

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Publisher Info
Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

Volume (Year): 57 (2000)
Issue (Month): 1 (September)
Pages: 22-
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Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200009)57:1_22:fpau_2.0.tx_2-h

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Find related papers by JEL classification:
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods

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Kai A. Konrad & Gert Wagner, 2000. "Reform of the Public Pension System in Germany," Discussion Papers of DIW Berlin 200, DIW Berlin, German Institute for Economic Research. [Downloadable!]
Tatiana Damjanovic, 2005. "On the Possibility of Pareto-improving Pension Reform," CRIEFF Discussion Papers 0504, Centre for Research into Industry, Enterprise, Finance and the Firm. [Downloadable!]
Other versions:
- Tatiana Damjanovic, 2006. "On The Possibility Of Pareto-Improving Pension Reform," Manchester School, University of Manchester, vol. 74(6), pages 711-724, December. [Downloadable!] (restricted)
Walter H. Fisher & Christian Keuschnigg, 2007. "Pension Reform and Labor Market Incentives," University of St. Gallen Department of Economics working paper series 2007 2007-13, Department of Economics, University of St. Gallen. [Downloadable!]
Other versions:
- Walter H. Fisher & Christian Keuschnigg, 2007. "Pension Reform and Labor Market Incentives," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
- Fisher, Walter H. & Keuschnigg, Christian, 2007. "Pension Reform and Labor Market Incentives," Economics Series 208, Institute for Advanced Studies. [Downloadable!]
Keuschnigg Christian & Keuschnigg Mirela, 2004. "Aging, Labor Markets and Pension Reform in Austria," GE, Growth, Math methods 0404002, EconWPA. [Downloadable!]
Other versions:
- Christian Keuschnigg & Mirela Keuschnigg, 2004. "Aging, Labor Markets and Pension Reform in Austria," University of St. Gallen Department of Economics working paper series 2004 2004-03, Department of Economics, University of St. Gallen. [Downloadable!]
- Christian Keuschnigg & Mirela Keuschnigg, 2004. "Aging, Labor Markets, and Pension Reform in Austria," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 60(3), pages 359-, September.
Marko Köthenbürger & Panu Poutvaara, 2004. "Social Security Reform and Intergenerational Trade: Is there Scope for a Pareto-Improvement?," Public Economics 0404008, EconWPA. [Downloadable!]
Other versions:
- Marko Koethenbuerger & Panu Poutvaara, 2002. "Social Security Reform and Intergenerational Trade: Is there Scope for a Pareto-Improvement?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
Mark A. Roberts & Eric O'N. Fisher, . "Funded Pensions, Labor Market Participation, and Economic Growth," EPRU Working Paper Series 01-04, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics. [Downloadable!]
Other versions:
- Eric O'N. Fisher & Mark A. Roberts, 2002. "Funded Pensions, Labor Market Participation, and Economic Growth," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 59(3), pages 371-, August.
Casamatta, Georges & De Paoli, Caroline, 2007. "Choosing the Legal Retirement Age in Presence of Unemployment," CEPR Discussion Papers 6263, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)

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