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A way out of pay-as-you-go without a double burden

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  • Ulrich van Suntum

Abstract

It has repeatedly been proposed to reduce the conventional pay-as-you-go-systems to a base level, leaving advanced retirement provision for private funded systems. However, pay-as-you-go-systems are, in a sense, one way roads, with no available Pareto efficient way out. The paper discusses a combined public debt and taxing strategy which distributes the transition burden equally between future generations, leaving them only moderate losses in terms of present value. It is shown within both a two generations model and a multiple-generations model of OLG type, that, with this strategy, there results only a temporary increase in public debt ratio, which even turns into a public surplus in the long run. The paper argues that such a transformation towards a base pension system would be both economically advisable and politically feasible.

Suggested Citation

  • Ulrich van Suntum, "undated". "A way out of pay-as-you-go without a double burden," Working Papers 200105, Institute of Spatial and Housing Economics, Munster Universitary.
    • Handle: RePEc:muc:wpaper:200105
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    References listed on IDEAS

    as
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    4. Yeopil Yoon & Gabriel Talmain, "undated". "Endogenous Fertility, Endogenous Growth and Public Pension System: Should We Switch from a PAYG to a Fully-Funded System?," Discussion Papers 00/31, Department of Economics, University of York.
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    8. 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.
    9. Homburg, Stefan & Richter, Wolfram, 1990. "Eine effizienzorientierte Reform der GRV," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 183-191.
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    JEL classification:

    • D - Microeconomics
    • H - Public Economics
    • J - Labor and Demographic Economics

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