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Macroeconomic Effects of Social Security Privatization in a Small Unionized Economy

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  • Antonis Adam

Abstract

This paper analyses the effects of a pension system privatization in a unionized economy. Using an overlapping-generations framework we show that in an environment characterized by unemployment, a reform towards a private pension system in the steady state may result in lower levels of employment and capital stock. In this case even if the privatization increases the welfare of all future generations, the reduction in the welfare of the elderly due to reduced pension benefits may be greater and a Pareto improving transition to a private system may not be feasible. On the other hand if the reform leads to higher employment then a Pareto-improving pension privatization scheme can be constructed.

Suggested Citation

  • Antonis Adam, 2004. "Macroeconomic Effects of Social Security Privatization in a Small Unionized Economy," CESifo Working Paper Series 1371, CESifo.
    • Handle: RePEc:ces:ceswps:_1371
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp1371.pdf
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    References listed on IDEAS

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    1. Grout, Paul A, 1984. "Investment and Wages in the Absence of Binding Contracts: A Nash Bargining Approach," Econometrica, Econometric Society, vol. 52(2), pages 449-460, March.
    2. Gramlich, Edward M, 1996. "Different Approaches for Dealing with Social Security," American Economic Review, American Economic Association, vol. 86(2), pages 358-362, May.
    3. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 15(30), pages 48-104.
    4. Summers, Lawrence H, 1988. "Relative Wages, Efficiency Wages, and Keynesian Unemployment," American Economic Review, American Economic Association, vol. 78(2), pages 383-388, May.
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    Cited by:

    1. Pavlos Balamatsias, 2017. "Inequality, imperfect competition and fiscal policy," EconStor Preprints 182243, ZBW - Leibniz Information Centre for Economics.
    2. Tetsuo Ono, 2010. "Growth and unemployment in an OLG economy with public pensions," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(2), pages 737-767, March.

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    Keywords

    public pensions; social security privatization; labour union; unemployment;
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