PENSION FUNDING IN A UNIONIZED ECONOMY

Antonis Adam and Thomas Moutos

Scottish Journal of Political Economy, 2009, vol. 56, issue 2, 213-231

Abstract: This paper analyzes the effects of pension funding for a small open economy in which wages are subject to bargaining. Using an overlapping‐generations framework, we show that a reform away from a Pay‐As‐You‐Go towards a funded pension system will be Pareto improving only if the reform results in a reduction in the steady‐state unemployment rate. However, the reduction in the unemployment rate is by no means warranted: although for pension systems which involve a limited amount of intra‐generational redistribution this is likely, for systems displaying a high degree of intra‐generational redistribution the unemployment rate may well rise thus preventing the realization of welfare gains.

Date: 2009
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https://doi.org/10.1111/j.1467-9485.2009.00481.x

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Persistent link: https://EconPapers.repec.org/RePEc:bla:scotjp:v:56:y:2009:i:2:p:213-231

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