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Social security reform : the capital accumulation and intergenerational distribution effect

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Author Info
Arrau, Patricio
Abstract

Reforming the social security system has received increasing attention in recent years. This paper studies a switch from an unfunded defined-benefit system (pay-as-you-go) to a fully-funded defined-contribution system in a stable demographic environment. While the former finances current pensions with current social security taxes which are not perceived as linked to the benefits, the latter finances the pensions out of the funds accumulated in special accounts for retirement purposes. Therefore, the contributions are directly linked to the benefits. The paper describes the theoretical model and discusses the data for the calibration. The model is calibrated to resemble the Mexican economy and indicates how the reform is actually carried out and the alternatives of the government to finance the transition. The simulation results are presented and the main results are summarized.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 512.

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Date of creation: 31 Oct 1990
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Handle: RePEc:wbk:wbrwps:512

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Related research
Keywords: Economic Theory&Research; Environmental Economics&Policies; Banks&Banking Reform; Pensions&Retirement Systems; Governance Indicators;

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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. Michael J. Boskin & Laurence J. Kotlikoff & Douglas J. Puffert & John B. Shoven, 1987. "Social Security: A Financial Appraisal Across and Within Generations," NBER Working Papers 1891, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  1. Carlos Sales-Sarrapy & Fernando Solis-Soberon & Alejandro Villagomez-Amez, 1996. "Pension System Reform: The Mexican Case," NBER Working Papers 5780, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Laurence J. Kotlikoff, 1995. "Privatization of Social Security: How It Works and Why It Matters," NBER Working Papers 5330, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Laurence J. Kotlikoff, 1996. "Simulating the Privatization of Social Security in General Equilibrium," NBER Working Papers 5776, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Cerda, Luis & Grandolini & Grandolini, Gloria, 1998. "The 1997 pension reform in Mexico," Policy Research Working Paper Series 1933, The World Bank. [Downloadable!]
  5. Alvaro Forteza, 1998. "Los efectos de la Reforma uruguaya de la Seguridad Social en el ahorro," Documentos de Trabajo (working papers) 1098, Department of Economics - dECON. [Downloadable!]
  6. Rodrigo Cifuentes, 1995. "Reforma de los Sistemas Previsionales: Aspectos Macroeconómicos," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 32(96), pages 217-250. [Downloadable!]
  7. Laurence J. Kotlikoff, 1998. "Privatizing U.S. Social Security: some possible effects on intergenerational equity and the economy," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 31-37. [Downloadable!]
  8. Serrano, Carlos, 1999. "Social security reform, income disribution, fiscal policy, and capital accumulation," Policy Research Working Paper Series 2055, The World Bank. [Downloadable!]
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