Political (In)Stability of Social Security Reform

28 Pages Posted: 3 Feb 2016

See all articles by Krzysztof Makarski

Krzysztof Makarski

National Bank of Poland; Warsaw School of Economics (SGH)

Joanna Tyrowicz

National Bank of Poland; University of Warsaw

Date Written: January 18, 2016

Abstract

We analyze the political stability of welfare enhancing privatization of the social security. We consider an economy populated by overlapping generations, who vote on abolishing the funded system and replacing it with the pay-as-you-go scheme, i.e. "unprivatizing" the pension system. We show that even if abolishing the system is overall welfare deteriorating, the cohort distribution of benefits along the transition path turns some ways of "unprivatizing" social security always politically favorable.

Keywords: pension system reform, time inconsistency, welfare

JEL Classification: H55, D72, C68, E17, E27

Suggested Citation

Makarski, Krzysztof and Tyrowicz, Joanna, Political (In)Stability of Social Security Reform (January 18, 2016). Netspar Discussion Paper No. 01/2016-004, Available at SSRN: https://ssrn.com/abstract=2726624 or http://dx.doi.org/10.2139/ssrn.2726624

Krzysztof Makarski (Contact Author)

National Bank of Poland ( email )

00-919 Warsaw
Poland

Warsaw School of Economics (SGH)

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

Joanna Tyrowicz

National Bank of Poland

00-919 Warsaw
Poland

University of Warsaw ( email )

Krakowskie Przedmiescie 26/28
Warszawa, Pl-00681
Poland

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