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What Are the Gains from Pension Reform?

Author

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  • Lindbeck, Assar

    () (The Research Institute of Industrial Economics)

  • Persson, Mats

    () (Institute for International Economic Studies)

Abstract

This paper presents a unified analytical framework for the analysis of social security reform. It discusses reform along two dimensions: Pay-As-You-Go versus fully funded on the one hand, and actuarial versus non-actuarial on the other. Making the system more actuarial entails a trade-off between less distorted work incentives and intra-generational redistribution. Increasing the degree of funding entails a trade-off between more distorted work incentives, and redistribution in favor of future generations. If a PAYGO system already has strong actuarial elements, the additional welfare gain from making it fully funded derives from the possibility of portfolio diversification.

Suggested Citation

  • Lindbeck, Assar & Persson, Mats, 2000. "What Are the Gains from Pension Reform?," Working Paper Series 535, Research Institute of Industrial Economics.
  • Handle: RePEc:hhs:iuiwop:0535
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    References listed on IDEAS

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    Cited by:

    1. Assar Lindbeck, 2002. "Pensions and Contemporary Socioeconomic Change," NBER Chapters,in: Social Security Pension Reform in Europe, pages 19-48 National Bureau of Economic Research, Inc.
    2. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324 Elsevier.

    More about this item

    Keywords

    Pension reform; social security; funded pensions; work incentives; saving;

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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