Privatizing Social Security: A Critical Assessment
AbstractThe purpose of this paper is to provide a critical evaluation of theoretical models showing that shifting from pay-as-you-go to fully funded social security schemes can be made Pareto-improving. Further, it argues that what often makes a reform towards funded schemes attractive is a number of additional features that could also have been introduced in the unfunded social security system.The paper is organized in three main sections. The first one presents a taxonomy of social security systems; this allows us to show that in privatization programmes the issue is not just moving from unfunded to funded mechanisms but also, and above all, to individualize the system in such a way that there is no more redistribution. The second shows that funded and pay-as-you-go schemes are equivalent as long as the payroll taxes paid during the period of inception of the pay-as-you-go scheme are duly invested. Finally, the third section presents two models of Pareto-improving social security reforms and discusses the assumptions on which they rely. The Geneva Papers on Risk and Insurance (1999) 24, 114–130. doi:10.1111/1468-0440.00008
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Bibliographic InfoArticle provided by Palgrave Macmillan in its journal The Geneva Papers on Risk and Insurance.
Volume (Year): 24 (1999)
Issue (Month): 1 (January)
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Other versions of this item:
- BELAN, Pascal & PESTIEAU, Pierre, 1997. "Privatizing social security: a critical assessment," CORE Discussion Papers 1997084, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- BELAN, Pascal & PESTIEAU, Pierre, . "Privatizing social security: A critical assessment," CORE Discussion Papers RP -1407, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- D9 - Microeconomics - - Intertemporal Choice
- J1 - Labor and Demographic Economics - - Demographic Economics
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