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The Stability and Growth Pact as an Impediment to Privatizing Social Security

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  • Razin, Assaf
  • Sadka, Efraim

Abstract

The ageing of the population shakes the confidence in the economic viability of pay-as-you-go social security systems. We demonstrate how in a political-economy framework the shaken confidence leads to the downsizing of the social security-system, and to the emergence of supplemental individual retirement programs. Lifting the Stability Pact-type ceiling on fiscal deficits is shown to facilitate the transition from a national to a private pension system, through an endogenously determined shift in the median voter.

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  • Razin, Assaf & Sadka, Efraim, 2002. "The Stability and Growth Pact as an Impediment to Privatizing Social Security," CEPR Discussion Papers 3621, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:3621
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    1. Razin, Assaf & Sadka, Efraim, 1995. "Resisting Migration: Wage Rigidity and Income Distribution," American Economic Review, American Economic Association, vol. 85(2), pages 312-316, May.
    2. Assaf Razin & Efraim Sadka & Phillip Swagel, 2002. "The Aging Population and the Size of the Welfare State," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 900-918, August.
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    Cited by:

    1. Sylvester Eijffinger, 2003. "How can the Stability and Growth Pact be improved to achieve both stronger discipline and higher flexibility?," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 38(1), pages 10-15, January.
    2. Nikos Koutsiaras, 2010. "How to Spend it: Putting a Labour Market Modernization Fund in Place of the European Globalization Adjustment Fund," Journal of Common Market Studies, Wiley Blackwell, vol. 48(3), pages 617-640, June.
    3. Marco Buti & Sylvester Eijffinger & Daniele Franco, 2003. "Revisiting the Stability and Growth Pact: grand design or internal adjustment?," European Economy - Economic Papers 2008 - 2015 180, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    4. Marco Buti & Werner Rüger & Alessandro Turrini, 2009. "Is Lisbon Far from Maastricht? Trade-offs and Complementarities between Fiscal Discipline and Structural Reforms," CESifo Economic Studies, CESifo Group, vol. 55(1), pages 165-196, March.
    5. Paolo Biraschi, "undated". "Searching for the optimal EMU fiscal rule:an ex-post analysis of the SGP reform proposals," Working Papers wp2008-7, Department of the Treasury, Ministry of the Economy and of Finance.
    6. Larch, Martin & Van den Noord, Paul & Jonung, Lars, 2010. "The stability and growth pact: lessons from the great recession," MPRA Paper 27900, University Library of Munich, Germany.
    7. Alessandro Girardi & Paolo Paesani, 2008. "Structural Reforms and Fiscal Discipline in Europe," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 15(2), pages 389-402, September.
    8. Buti, M. & Eijffinger, S.C.W. & Franco, D., 2005. "The Stability pact Pains : A Forward-Looking Assessment of the Reform Debate," Discussion Paper 2005-101, Tilburg University, Center for Economic Research.
    9. Velculescu, Delia, 2011. "Private Pension Systems in Emerging Europe: The Uncertain Road Ahead," MPRA Paper 88969, University Library of Munich, Germany, revised 2011.
    10. Nikos Koutsiaras, 2010. "How to Spend it: Putting a Labour Market Modernization Fund in Place of the European Globalization Adjustment Fund," Journal of Common Market Studies, Wiley Blackwell, vol. 48, pages 617-640, June.
    11. Marek Lubiński, 2011. "Przyszłość paktu stabilności i wzrostu," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 1-2, pages 19-42.
    12. Poplawski Ribeiro, Marcos & Beetsma, Roel, 2008. "The political economy of structural reforms under a deficit restriction," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 179-198, March.
    13. Campoy Juan Cristóbal & Negrete Juan C., 2010. "Structural Reforms and Budget Deficits in a Monetary Union: A Strategic Approach," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-31, July.
    14. Simonovits, Andras, 2007. "Can population ageing imply a smaller welfare state?," European Journal of Political Economy, Elsevier, vol. 23(2), pages 534-541, June.

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    More about this item

    Keywords

    Ageing; Budget deficit; Median voter; Pay-as-you-go social security; Individual retirement accounts;
    All these keywords.

    JEL classification:

    • H00 - Public Economics - - General - - - General

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