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Why Funding Is not a Solution to the "Social Security Crisis"

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  • Friedrich Breyer

Abstract

Es ist heute unbestritten, dass die umlagefinanzierten staatlichen Rentensysteme in den meisten OECD.Ländern in den kommenden Jahrzehnten wegen der dramatisch steigenden Alterslastquote schwerwiegende finanzielle Probleme bekommen werden. Dennoch gibt es eine intensive Debatte über die angemessene Therapie. Gerade in den letzten Jahren haben Vorschläge zugenommen, die auf einen (teilweisen) Übergang zur Kapitaldeckung hinauslaufen. Da ein solcher Übergang bekanntlich keine Pareto-Verbesserung bewirkt, muss man fragen, durch welche Zielsetzungen er gerechtfertigt werden könnte. Die vorliegende Arbeit geht dieser Frage nach und identifiziert sieben Trugschlüsse, die von Anhängern eines solchen Übergangs häufig begangen werden. It is now a commonplace that the unfunded public pension systems of many OECD countries will run into severe financing problems in the coming decades due to a dramatically increasing pensioner/worker ratio. While this diagnosis is completely undisputed, there is still a vigorous debate on the appropriate therapy. In this debate, a number of proposals have been brought forward in particular in the last five years, which mainly consist in a (partial) transition to a funded pension system. Because such a transition is not a Pareto improvement, it is necessary to ask what can be the policy target that justifies such a redistributive move? The present paper tries to examine this question by identifying seven fallacies that are commonly made by advocates of such a transition.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.38607.de/dp254.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 254.

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Length: 8 p.
Date of creation: 2001
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Handle: RePEc:diw:diwwpp:dp254

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References

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  1. Breyer, Friedrich & von der Schulenburg, J-Matthias Graf, 1990. " Family Ties and Social Security in a Democracy," Public Choice, Springer, vol. 67(2), pages 155-67, November.
  2. Breyer, Friedrich & Graf v d Schulenburg, J-Matthias, 1987. "Voting on Social Security: The Family as Decision-Making Unit," Kyklos, Wiley Blackwell, vol. 40(4), pages 529-47.
  3. Homburg, Stefan, 2014. "Old Age Pension Systems: A Theoretical Evaluation," Hannover Economic Papers (HEP) dp-524, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  4. Brunner, Johann K., 1993. "Transition from a pay-as-you-go to a fully-funded pension system: The case of differing individuals and intragenerational fairness," Discussion Papers, Series 1 266, University of Konstanz, Department of Economics.
  5. Martin Feldstein & Andrew Samwick, 1998. "The Transition Path in Privatizing Social Security," NBER Chapters, in: Privatizing Social Security, pages 215-264 National Bureau of Economic Research, Inc.
  6. Feldstein, Martin, 1996. "The Missing Piece in Policy Analysis: Social Security Reform," American Economic Review, American Economic Association, vol. 86(2), pages 1-14, May.
  7. Homburg, Stefan, 2000. "Compulsory savings in the welfare state," Journal of Public Economics, Elsevier, vol. 77(2), pages 233-239, August.
  8. Mathias Kifman & Dirk Schindler, 2000. "Smoothing the Implicit Tax Rate in a Pay-as-you-go Pension System," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(3), pages 261-, May.
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Cited by:
  1. Corneo, Giacomo & Keese, Matthias & Schröder, Carsten, 2008. "Can governments boost voluntary retirement savings via tax incentives and subsidies? A German case study for low-income households," Economics Working Papers 2008,18, Christian-Albrechts-University of Kiel, Department of Economics.
  2. Friedrich Breyer & Mathias Kifmann, 2001. "Incentives to Retire Later: A Solution to the Social Security Crisis?," Discussion Papers of DIW Berlin 266, DIW Berlin, German Institute for Economic Research.
  3. Oksanen, Heikki, 2003. "A nyugdíjreformtervek a jóléti államokban - öregedő népesség esetén
    [Pension-reform blueprints for welfare states under ageing populations]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 654-670.

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