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

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  • Breyer, Friedrich

    ()
    (University of Konstanz)

Abstract

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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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 328.

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Length: 17 pages
Date of creation: Jul 2001
Date of revision:
Handle: RePEc:iza:izadps:dp328

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Keywords: Pareto improvement; transition to funding; Social security; policy proposals;

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References

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  1. 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, Mohr Siebeck, Tübingen, vol. 57(3), pages 261-, May.
  2. Breyer, Friedrich & Graf v d Schulenburg, J-Matthias, 1987. "Voting on Social Security: The Family as Decision-Making Unit," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 40(4), pages 529-47.
  3. Homburg, Stefan, 1997. "Old-age Pension Systems: A Theoretical Evaluation," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 233-246.
  4. Martin Feldstein, 1996. "The Missing Piece in Policy Analysis: Social Security Reform," NBER Working Papers 5413, National Bureau of Economic Research, Inc.
  5. Homburg, Stefan, 2000. "Compulsory savings in the welfare state," Journal of Public Economics, Elsevier, Elsevier, vol. 77(2), pages 233-239, August.
  6. Breyer, Friedrich & von der Schulenburg, J-Matthias Graf, 1990. " Family Ties and Social Security in a Democracy," Public Choice, Springer, Springer, vol. 67(2), pages 155-67, November.
  7. Martin Feldstein & Andrew Samwick, 1996. "The Transition Path in Privatizing Social Security," NBER Working Papers 5761, National Bureau of Economic Research, Inc.
  8. 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 I 266, University of Konstanz, Department of Economics.
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Citations

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Cited by:
  1. 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.
  2. 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.
  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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