Why Funding is Not a Solution to the Social Security Crisis

10 Pages Posted: 30 Jul 2001

See all articles by Friedrich Breyer

Friedrich Breyer

University of Konstanz - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: July 2001

Abstract

It is now a commonplace that the unfunded public pension systems of many OECD countries will run into severe financing problems in the coming decades due to a dramatically increasing pensioner/worker ratio. While this diagnosis is completely undisputed, there is still a vigorous debate on the appropriate therapy. In this debate, a number of proposals have been brought forward in particular in the last five years, which mainly consist in a (partial) transition to a funded pension system. Because such a transition is not a Pareto improvement, it is necessary to ask what can be the policy target that justifies such a redistributive move? The present paper tries to examine this question by identifying seven fallacies that are commonly made by advocates of such a transition.

Keywords: Social Security, Transition to Funding, Pareto Improvement, Policy Proposals

JEL Classification: H55

Suggested Citation

Breyer, Friedrich, Why Funding is Not a Solution to the Social Security Crisis (July 2001). IZA Discussion Paper No. 328; DIW Berlin Discussion Paper No. 254. Available at SSRN: https://ssrn.com/abstract=276518

Friedrich Breyer (Contact Author)

University of Konstanz - Department of Economics ( email )

Fachbereich Wirtschaftswissenschaften Fach D-135
D-78457 Konstanz
Germany
+49 (0)75 31/88-25 68 (Phone)
+49 (0)75 31/88-41 35 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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