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What Are the Gains from Pension Reform?

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Author Info

  • Lindbeck, Assar

    () (The Research Institute of Industrial Economics)

  • Persson, Mats

    () (Institute for International Economic Studies)

Abstract

This paper presents a unified analytical framework for the analysis of social security reform. It discusses reform along two dimensions: Pay-As-You-Go versus fully funded on the one hand, and actuarial versus non-actuarial on the other. Making the system more actuarial entails a trade-off between less distorted work incentives and intra-generational redistribution. Increasing the degree of funding entails a trade-off between more distorted work incentives, and redistribution in favor of future generations. If a PAYGO system already has strong actuarial elements, the additional welfare gain from making it fully funded derives from the possibility of portfolio diversification.

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File URL: http://swopec.hhs.se/iuiwop/papers/iuiwop0535.pdf
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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 535.

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Length: 28 pages
Date of creation: 05 Jul 2000
Date of revision:
Handle: RePEc:hhs:iuiwop:0535

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Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
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Keywords: Pension reform; social security; funded pensions; work incentives; saving;

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References

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  1. Martin Feldstein, 1997. "The Missing Piece in Policy Analysis: Social Security Reform," NBER Working Papers 5413, National Bureau of Economic Research, Inc.
  2. Jeremy J. Siegel & Richard H. Thaler, 1997. "Anomalies: The Equity Premium Puzzle," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 191-200, Winter.
  3. Martin Feldstein, 1995. "Would Privatizing Social Security Raise Economic Welfare?," NBER Working Papers 5281, National Bureau of Economic Research, Inc.
  4. Olivia S. Mitchell, 1998. "Administrative Costs in Public and Private Retirement Systems," NBER Chapters, in: Privatizing Social Security, pages 403-456 National Bureau of Economic Research, Inc.
  5. Shiller, Robert J., 1999. "Social security and institutions for intergenerational, intragenerational, and international risk-sharing," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 165-204, June.
  6. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324 Elsevier.
  7. Persson, Mats, 2000. "Five Fallacies in the Social Security Debate," Seminar Papers 686, Stockholm University, Institute for International Economic Studies.
  8. 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.
  9. Peter Diamond, 2004. "Social Security," American Economic Review, American Economic Association, vol. 94(1), pages 1-24, March.
  10. Edward M. Gramlich, 1996. "Different Approaches for Dealing with Social Security," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 55-66, Summer.
  11. Laurence J. Kotlikoff, 1996. "Simulating the Privatization of Social Security in General Equilibrium," NBER Working Papers 5776, National Bureau of Economic Research, Inc.
  12. Breyer, Friedrich & Straub, Martin, 1991. "Welfare effects of unfunded pension systems when labor supply is endogenous," Discussion Papers, Series 1 252, University of Konstanz, Department of Economics.
  13. Assar Lindbeck, 2000. "Pensions and Contemporary Socioeconomic Change," NBER Working Papers 7770, National Bureau of Economic Research, Inc.
  14. Hans-Werner Sinn, 1999. "Pension Reform and Demographic Crisis: Why a Funded System is Needed and why it is not Needed," CESifo Working Paper Series 195, CESifo Group Munich.
  15. Alan L. Gustman & Thomas L. Steinmeier, 1998. "Privatizing Social Security: First-Round Effects of a Generic, Voluntary, Privatized U.S. Social Security System," NBER Chapters, in: Privatizing Social Security, pages 313-361 National Bureau of Economic Research, Inc.
  16. Peter A. Diamond, 1996. "Proposals to Restructure Social Security," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 67-88, Summer.
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Cited by:
  1. Assar Lindbeck, 2002. "Pensions and Contemporary Socioeconomic Change," NBER Chapters, in: Social Security Pension Reform in Europe, pages 19-48 National Bureau of Economic Research, Inc.

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