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The future of pension systems in Europe. A reappraisal

  • Michele Boldrin
  • Juan J. Dolado
  • Juan F. Jimeno
  • Franco Peracchi

In this paper we examine and ultimately challenge the traditional viewpoint on the future of current pension systems in Europe, according to which the effects of the ageing bomb will inevitably bring down our unfunded PA YG public pension systems. First, we claim that the projected dramatic increase in the pension burden in mostly due to labour market problems and the generosity of the system, rather than to demographic factors. Secondly, we conclude that a fully funded system cannot be achieved without a substantial reduction in current pension payments unless it is financed by issuing earnmarked public debt. Finally we claim that a socially efficient pension system should be a mixed one, partly funded and partly PA VG, on the basis of optimal portfolio allocation in a context of uncertain returns to both human and physical capital and on the role ofPAYG for financing the accumulation of human capital.

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Paper provided by FEDEA in its series Working Papers with number 99-08.

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Handle: RePEc:fda:fdaddt:99-08
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  1. Diamond, P. A., 1977. "A framework for social security analysis," Journal of Public Economics, Elsevier, vol. 8(3), pages 275-298, December.
  2. Robert C. Merton, 1983. "On the Role of Social Security as a Means for Efficient Risk Sharing in an Economy Where Human Capital Is Not Tradable," NBER Chapters, in: Financial Aspects of the United States Pension System, pages 325-358 National Bureau of Economic Research, Inc.
  3. Olivia S. Mitchell & Stephen P. Zeldes, 1996. "Social Security Privatization: A Structure for Analysis," NBER Working Papers 5512, National Bureau of Economic Research, Inc.
  4. David Miles & Allan Timmermann, 1999. "Risk sharing and transition costs in the reform of pension systems in Europe," Economic Policy, CEPR;CES;MSH, vol. 14(29), pages 251-286, October.
  5. Iben, Andreas & Miles, David K, 1998. "The Reform of Pension Systems: Winners and Losers Across Generations," CEPR Discussion Papers 1943, C.E.P.R. Discussion Papers.
  6. E.P. Davis, 1998. "Pension Fund Reform and European Financial Markets," FMG Special Papers sp107, Financial Markets Group.
  7. 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.
  8. Deborah Roseveare & Willi Leibfritz & Douglas Fore & Eckhard Wurzel, 1996. "Ageing Populations, Pension Systems and Government Budgets: Simulations for 20 OECD Countries," OECD Economics Department Working Papers 168, OECD Publishing.
  9. Holzmann, Robert, 1997. "On economic benefits and fiscal requirements of moving from unfunded to funded pensions," Financiamiento para el Desarrollo 48, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
  10. Modigliani, Franco. & Ceprini, Marialuisa E. A. & Muralidhar, Arun Sundarram., 1999. "An MIT solution to the social security crisis," Working papers WP 4051-99., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  11. Martin Feldstein & Andrew Samwick, 1998. "The Transition Path in Privatizing Social Security," NBER Chapters, in: Privatizing Social Security, pages 215-264 National Bureau of Economic Research, Inc.
  12. Montes Alonso, Ana & Boldrin, Michele, 1998. "Intergenerational transfer institutions public education and public pensions," UC3M Working papers. Economics 6148, Universidad Carlos III de Madrid. Departamento de Economía.
  13. Miles, David, 1999. "Modelling the Impact of Demographic Change upon the Economy," Economic Journal, Royal Economic Society, vol. 109(452), pages 1-36, January.
  14. Peter A. Diamond, 1997. "Macroeconomics Aspects of Social Security Reform," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 1-88.
  15. Laurence J. Kotlikoff, 1995. "Privatization of Social Security: How it Works and Why it Matters," Boston University - Institute for Economic Development 66, Boston University, Institute for Economic Development.
  16. Martin Feldstein, 1995. "Would Privatizing Social Security Raise Economic Welfare?," NBER Working Papers 5281, National Bureau of Economic Research, Inc.
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