Privatisierungsmöglichkeiten der Sozialversicherung in Europa

This paper argues that the pay-as-you-go systems that dominate the old age social security programs in Europe cannot provide the flexibility necessary to master the demographic changes to come. They are locked between the Scylla of low pension levels and the Charybdis of high contribution rates. The paper shows that a partial transition to a funded system, based on private savings, can provide additional flexibility in two ways. first, intertemporal substitution permits asmoothing of the demographic burden across a much longer peiod than the contemporary budget constraint of a pay-as-you-go system. second, international diversification on global capital markets enables to escape the likely decline of domestic rates of return in an aging economy. The paper takes the German pay-as-you-go system as an example. It provides projections of the contribution rate under alternative labor force scenarios and policies to demonstrate that the pay-as-you-go system has insufficient flexibility under realistic assumptions. The paper then turns to a partially funded system to show that the transition problem is much less severe than is often argued, and that financial risks can be minimized by international diversification. Indeed, a funded system that invests globally can provide rates of return that generate consumption profiles far above those that are possible under pay-as-you-go.