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The Gains from Pension Reform

  • Assar Lindbeck
  • Mats Persson

We classify social security pension systems in three dimensions: actuarial versus non-actuarial, funded versus unfunded, and defined-benefit versus defined-contribution systems. Recent pension reforms are discussed in terms of these dimensions. Shifting to a more actuarial system reduces labor-market distortions, although limiting the scope for redistribution. Shifting to a funded system may increase saving, redistribute income to future generations and distort contemporary labor supply. A partial shift to a funded system helps individuals diversify their pension assets. A shift from a defined-benefit to a defined-contribution system means that income risk will be shifted from workers to pensioners.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/002205103321544701
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Article provided by American Economic Association in its journal Journal of Economic Literature.

Volume (Year): 41 (2003)
Issue (Month): 1 (March)
Pages: 74-112

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Handle: RePEc:aea:jeclit:v:41:y:2003:i:1:p:74-112
Note: DOI: 10.1257/002205103321544701
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