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Economic Effects of Public Pensions

Author

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  • Yoshibumi Aso

    (Professor, Faculty of Law, Keio University)

Abstract

While there are various arguments about public pension system reform, this paper examines the conflicting views from the perspective of economic theory. The paper first explains the raison d fetre of public pension systems and then discusses financing systems of public pensions (funding system and pay-as-you-go system). Under the pay as you go system, the benefits to the elderly at the introduction of the pension system are equal to the sum of the present discounted value of net burden of all generations born thereafter. Also, the pay as you go pension system has a huge amount of net pension debt, which must be borne by future generations. The paper points out that shifting to a funding system is an issue of how many years the repayment of such net liabilities should desirably be spread over. Finally, although consumption tax is generally thought to be a desirable revenue source of the pension system, we point out this idea is incorrect from a theoretical view point.

Suggested Citation

  • Yoshibumi Aso, 2013. "Economic Effects of Public Pensions," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 9(4), pages 575-596, September.
    • Handle: RePEc:mof:journl:ppr023a
    as

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    File URL: http://warp.da.ndl.go.jp/info:ndljp/pid/11217434/www.mof.go.jp/english/pri/publication/pp_review/ppr023/ppr023a.pdf
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    Cited by:

    1. Bansal, Vaiddehi & Wallach, Jessica & Lira Brandão, Juliana & Lord, Sarah & Taha, Ninar & Akoglu, Tulay & Kiss, Ligia & Zimmerman, Cathy, 2023. "An intervention-focused review of modern slave labor in Brazil’s mining sector," World Development, Elsevier, vol. 171(C).

    More about this item

    Keywords

    public pension reform; pension debt; transition to funded system;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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