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Financial Development and Pay-As-You-Go Social Security

Listed author(s):
  • Pinotti Paolo

    ()

    (Bank of Italy)

Financial markets and pay-as-you-go social security are two alternative ways to provide for retirement. The size of social security programs could therefore be partly determined by the level of financial frictions. I explore this possibility by using legal origin as a proxy for financial frictions that may hold back financial development. The empirical analysis yields two main results. First, legal origin-driven differences in financial frictions are an important determinant of social security; in particular, common law countries exhibit significantly smaller public pension programs. Second, two-stage estimates suggest that legal origin impacts on social security through financial market development.

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Article provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 9 (2009)
Issue (Month): 1 (March)
Pages: 1-21

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Handle: RePEc:bpj:bejmac:v:9:y:2009:i:1:n:11
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