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The possibility of Pareto-Improving Pension Reform: More Arguments

  • Damjanovic, Tatiana

    (University of Essex)

This article provides simulation results of Pareto-improving transitions from pay-as-you-go to fully funded pension systems in an economy where agents are heterogeneous within generations. The possibility of such transitions for a wide range of parameters states that intergenerational heterogeneity should no longer be considered an obstacle when implementing Pareto-improving pension reforms. To maintain redistributive or insurance mechanisms supported by pay-as-you-go systems, I propose to replace social system with redistributive tax and transfer payments inside one generation. This would save dynamically efficient economy from the inefficiency related to the implicit taxes on pension contributions imposed by pay-as-you-go systems.

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Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2003 with number 53.

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Date of creation: 04 Jun 2003
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Handle: RePEc:ecj:ac2003:53
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  1. Samwick, Andrew & Feldstein, Martin S., 2000. "Allocating Payroll Tax Revenue to Personal Retirement Accounts to Maintain Social Security Benefits and the Payroll Tax Rate," Scholarly Articles 10456096, Harvard University Department of Economics.
  2. Laurence J. Kotlikoff, 1996. "Privatization of Social Security: How It Works and Why It Matters," NBER Chapters, in: Tax Policy and the Economy, Volume 10, pages 1-32 National Bureau of Economic Research, Inc.
  3. Martin Feldstein & Andrew Samwick, 1997. "The Economics of Prefunding Social Security and Medicare Benefits," NBER Working Papers 6055, National Bureau of Economic Research, Inc.
  4. Bernd Raffelhüschen, 1993. "Funding social security through Pareto-optimal conversion policies," Journal of Economics, Springer, vol. 58(1), pages 105-131, December.
  5. Laurence J. Kotlikoff, 1998. "Simulating the Privatization of Social Security in General Equilibrium," NBER Chapters, in: Privatizing Social Security, pages 265-311 National Bureau of Economic Research, Inc.
  6. Homburg, Stefan, 2014. "The Efficiency of Unfunded Pension Schemes," Hannover Economic Papers (HEP) dp-523, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  7. Gary D. Hansen & Edward C. Prescott, 2002. "Malthus to Solow," American Economic Review, American Economic Association, vol. 92(4), pages 1205-1217, September.
  8. Juan C. Conesa & Dirk Krueger, 1999. "Social Security Reform with Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 757-795, October.
  9. Feldstein, Martin, 1996. "The Missing Piece in Policy Analysis: Social Security Reform," American Economic Review, American Economic Association, vol. 86(2), pages 1-14, May.
  10. Matthias Wrede, 1999. "Pareto Efficient Pay-as-You-Go Pension Systems with Multi-Period Lives," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 219(3+4), pages 494-503, September.
  11. BELAN, Pascal & MICHEL, Philippe & PESTIEAU, Pierre, . "Pareto-improving social security reform," CORE Discussion Papers RP -1372, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Bernd Raffelhüschen, 1993. "Funding social security through Pareto-optimal conversion policies," Journal of Economics, Springer, vol. 7(1), pages 105-131, December.
  13. Laurence J. Kotlikoff & Kent A. Smetters & Jan Walliser, 1998. "Social Security: Privatization and Progressivity," NBER Working Papers 6428, National Bureau of Economic Research, Inc.
  14. Martin Feldstein & Andrew Samwick, 1996. "The Transition Path in Privatizing Social Security," NBER Working Papers 5761, National Bureau of Economic Research, Inc.
  15. Brunner, Johann K., 1993. "Redistribution and the efficiency of the pay-as-you-go pension system," Discussion Papers, Series I 265, University of Konstanz, Department of Economics.
  16. Martin Feldstein & Andrew Samwick, 1999. "Maintaining Social Security Benefits and Tax Rates through Personal Retirement Accounts: An Update Based on the 1998 Social Security Trustees Report," NBER Working Papers 6540, National Bureau of Economic Research, Inc.
  17. Brunner, Johann K., 1993. "Transition from a pay-as-you-go to a fully-funded pension system: The case of differing individuals and intragenerational fairness," Discussion Papers, Series I 266, University of Konstanz, Department of Economics.
  18. Sebastian Edwards, 1998. "The Chilean Pension Reform: A Pioneering Program," NBER Chapters, in: Privatizing Social Security, pages 33-62 National Bureau of Economic Research, Inc.
  19. Berthold U. Wigger, 1999. "Public Pensions and Growth," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 56(2), pages 241-, June.
  20. Breyer, Friedrich & Straub, Martin, 1991. "Welfare effects of unfunded pension systems when labor supply is endogenous," Discussion Papers, Series I 252, University of Konstanz, Department of Economics.
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