With compulsory funded public social security systems, pension savings constitute a large stock of assets. In this paper we consider an economy populated by overlapping generations, which may decide about abolishing the funded system and replacing it with the pay-as-you-go scheme (i.e. unprivatizing the pension system). We compare politically stable as well as politically unstable reforms and show that even if the funded system is overall welfare enhancing, the cohort distribution of benefits along the transition path may turn privatizing social security politically unsustainable.
Mulligan, C. B., & Sala-i Martin, X. (2003). Social security, retirement, and the single-mindedness of the electorate. NBER Working Paper, 9691, National Bureau of Economic Research, Inc.
Orbán, G., & Palotai, D. (2005). The sustainability of the Hungarian pension system: A reassessment. Technical report, Magyar Nemzeti Bank (The Central Bank of Hungary).
Orszag, P. R., & Stiglitz, J. E. (2001). Rethinking pension reform: Ten myths about social security systems. In R. Holzman & J. E. Stiglitz (Eds.), New ideas about old age security (pp. 17–56). Washington, DC: World Bank.
Palmer, E. (2000). The Swedish pension reform model: Framework and issues. Social Protection Discussion Papers, 23086, The World Bank.
Samuelson, P. A. (1958). An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money. Journal of Political Economy, 66, 467–482.
Sjoblom, K. (1985). Voting for social security. Public Choice, 45(3), 225–240.
Tabellini, G. (2000). A positive theory of social security. The Scandinavian Journal of Economics, 102(3), 523–545.
The main objectives of Peace Economics, Peace Science and Public Policy are to further research in Peace Science and Peace Economics, to expose the scholarly community to innovative peace-related research, to disseminate the study of peace economics to a wider audience.