A way out of pay-as-you-go without a double burden
It has repeatedly been proposed to reduce conventional pay-as-you-go-systems to a base level, leaving advanced retirement provision for private funded systems. However, pay-asyou-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 with 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.
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- 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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Elsevier, vol. 50(1), pages 77-91, January.
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- Homburg, Stefan, 1990.
"The Efficiency of Unfunded Pension Schemes,"
EconStor Open Access Articles,
ZBW - German National Library of Economics, pages 640-647.
- Homburg, Stefan & Richter, Wolfram, 1990. "Eine effizienzorientierte Reform der GRV," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 183-191..
- 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.
- Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-926, Sept./Oct.
- Feldstein, Martin, 2005. "Structural Reform of Social Security," Scholarly Articles 2794830, Harvard University Department of Economics.
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