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Why Funding is not a Solution to the "Social Security Crisis"

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  • Breyer, Friedrich

    (University of Konstanz)

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.

Suggested Citation

  • Breyer, Friedrich, 2001. "Why Funding is not a Solution to the "Social Security Crisis"," IZA Discussion Papers 328, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp328
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    References listed on IDEAS

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    1. Feldstein, Martin, 1996. "The Missing Piece in Policy Analysis: Social Security Reform," American Economic Review, American Economic Association, vol. 86(2), pages 1-14, May.
    2. Brunner, Johann K., 1996. "Transition from a pay-as-you-go to a fully funded pension system: The case of differing individuals and intragenerational fairness," Journal of Public Economics, Elsevier, vol. 60(1), pages 131-146, April.
    3. Homburg, Stefan, 1997. "Old-age Pension Systems: A Theoretical Evaluation," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 233-246.
    4. Breyer, Friedrich & von der Schulenburg, J-Matthias Graf, 1990. "Family Ties and Social Security in a Democracy," Public Choice, Springer, vol. 67(2), pages 155-167, November.
    5. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324, Elsevier.
    6. Mathias Kifman & Dirk Schindler, 2001. "Smoothing the Implicit Tax Rate in a Pay-as-you-go Pension System," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(3), pages 261-283, May.
    7. Homburg, Stefan, 2000. "Compulsory savings in the welfare state," Journal of Public Economics, Elsevier, vol. 77(2), pages 233-239, August.
    8. repec:bla:kyklos:v:40:y:1987:i:4:p:529-47 is not listed on IDEAS
    9. Martin Feldstein & Andrew Samwick, 1998. "The Transition Path in Privatizing Social Security," NBER Chapters, in: Privatizing Social Security, pages 215-264, National Bureau of Economic Research, Inc.
    10. Friedrich Breyer & J.‐Matthias Graf V. D. Schulenburg**, 1987. "Voting on Social Security: The Family as Decision‐Making Unit," Kyklos, Wiley Blackwell, vol. 40(4), pages 529-547, November.
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    Citations

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    Cited by:

    1. Oksanen, Heikki, 2003. "A nyugdíjreformtervek a jóléti államokban - öregedő népesség esetén [Pension-reform blueprints for welfare states under ageing populations]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 654-670.
    2. Corneo, Giacomo & Keese, Matthias & Schröder, Carsten, 2008. "Can governments boost voluntary retirement savings via tax incentives and subsidies? A German case study for low-income households," Economics Working Papers 2008-18, Christian-Albrechts-University of Kiel, Department of Economics.
    3. repec:diw:diwwpp:dp266 is not listed on IDEAS
    4. Breyer, Friedrich & Kifmann, Mathias, 2002. "Incentives to retire later – a solution to the social security crisis?," Journal of Pension Economics and Finance, Cambridge University Press, vol. 1(2), pages 111-130, July.
    5. Robert Stelter, 2016. "Fertility and health insurance types in Germany," LIDAM Discussion Papers IRES 2016021, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    6. Rodrigo Cerda, 2005. "On social security financial crisis," Journal of Population Economics, Springer;European Society for Population Economics, vol. 18(3), pages 509-517, September.

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    More about this item

    Keywords

    Pareto improvement; transition to funding; Social security; policy proposals;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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