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 funded social security schemes can be made Pareto-improving. Further, it argues that what often makes a reform toward funded schemes attractive is a number of additional features that could have been introduced as well in the unfunded social security system. The paper is organized in three main sections. The first presents a taxonomy of social security systems; this allows for showing that in privatization programs the issue is not just moving from unfunded to fully funded techniques, but also, and above all, individualizing the system is such a way that there is no more redistribution. The second shows that funded and pay-as-you-go schemes are perfectly 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.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1997084.
Date of creation: 01 Nov 1997
Date of revision:
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social security; privatization; retiremen;
Other versions of this item:
- Pascal Belan & Pierre Pestieau, 1999. "Privatizing Social Security: A Critical Assessment," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 24(1), pages 114-130, January.
- 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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