Funded Pensions and Unemployment
Journal
FinanzArchiv
ISSN
0015-2218
Type
journal article
Date Issued
2000
Author(s)
Demmel, Roland
Abstract
Pay-as-you-go (PAYG) pension schemes are becoming increasingly unsustainable in the face of drastic population aging. Simultaneously, the contribution rates may aggravate an already serious unemployment problem. A regime switch to a funded system could help to alleviate the unemployment problem in addition to restoring sustainability of social security. This paper asks how the transition to a partially funded system is implemented such that all generations may share in the efficiency gains from lower unemployment. We propose a welfare based transition scheme that cuts contributions to the PAYG system and uses public debt to compensate old generations for their previously acquired pension claims. Relying on an overlapping generations framework with union wage setting, we show that this reform reduces unemployment, boosts capital accumulation and yields welfare gains to present and future generations.
Language
English
Keywords
Pension funds
unemployment.
HSG Classification
not classified
Refereed
No
Publisher
Mohr Siebeck
Publisher place
Tuebingen
Volume
57
Number
1
Start page
22
End page
38
Pages
17
Subject(s)
Eprints ID
21971