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

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Author Info
Breyer, Friedrich () (University of Konstanz)

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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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Publisher 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: 16 pages
Date of creation: Jul 2001
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Handle: RePEc:iza:izadps:dp328

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

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Find related papers by JEL classification:
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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.
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  2. Homburg, Stefan, 2000. "Compulsory savings in the welfare state," Journal of Public Economics, Elsevier, vol. 77(2), pages 233-239, August. [Downloadable!] (restricted)
  3. Brunner, Johann K., 1996. "Transition from a pay-as-you-go to a fully funded pension system: The case of differing individuals and intragenerational fairness," Journal of Public Economics, Elsevier, vol. 60(1), pages 131-146, April. [Downloadable!] (restricted)
  4. 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.
  5. 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.
  6. Martin Feldstein & Andrew Samwick, 1996. "The Transition Path in Privatizing Social Security," NBER Working Papers 5761, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Breyer, Friedrich & Graf v d Schulenburg, J-Matthias, 1987. "Voting on Social Security: The Family as Decision-Making Unit," Kyklos, Blackwell Publishing, vol. 40(4), pages 529-47.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Corneo, Giacomo G. & 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. [Downloadable!]
  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. [Downloadable!]
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