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Social security reform : the capital accumulation and intergenerational distribution effect

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  • Arrau, Patricio
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    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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    Bibliographic Info

    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;

    References

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    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.
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    Cited by:
    1. Laurence J. Kotlikoff, 1996. "Simulating the Privatization of Social Security in General Equilibrium," NBER Working Papers 5776, National Bureau of Economic Research, Inc.
    2. Alvaro Forteza, 1998. "Los efectos de la Reforma uruguaya de la Seguridad Social en el ahorro," Documentos de Trabajo (working papers), Department of Economics - dECON 1098, Department of Economics - dECON.
    3. Laurence J. Kotlikoff, 1995. "Privatization of Social Security: How it Works and Why it Matters," Boston University - Institute for Economic Development, Boston University, Institute for Economic Development 66, Boston University, Institute for Economic Development.
    4. 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.
    5. Serrano, Carlos, 1999. "Social security reform, income disribution, fiscal policy, and capital accumulation," Policy Research Working Paper Series 2055, The World Bank.
    6. Eduardo Walker & Fernando Lefort, 2002. "Pension Reform And Capital Markets: Are There Any (Hard) Links?," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 5(2), pages 77-149.
    7. Cerda, Luis & Grandolini & Grandolini, Gloria, 1998. "The 1997 pension reform in Mexico," Policy Research Working Paper Series 1933, The World Bank.
    8. Fan Zhai & Yan Wang, 2004. "La réforme des retraites en Chine : enjeux, options et conséquences," Revue d'Économie Financière, Programme National Persée, Programme National Persée, vol. 77(4), pages 309-328.
    9. Carlos Sales-Sarrapy & Fernando Solis-Soberon & Alejandro Villagomez-Amezcua, 1998. "Pension System Reform: The Mexican Case," NBER Chapters, in: Privatizing Social Security, pages 135-175 National Bureau of Economic Research, Inc.
    10. Rodrigo Cifuentes, 1995. "Reforma de los Sistemas Previsionales: Aspectos Macroeconómicos," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 32(96), pages 217-250.

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