Uncertainty and Pension Systems Reforms

Jesus Ferreiro () and Felipe Serrano

Journal of Economic Issues, 2011, vol. 45, issue 2, 317-322

Abstract: Public pension systems have long been a focus of special attention by neoclassical economics. In a context of intense aging processes, mainstream economists argue that the replacement of the pay-as-you-go pensions systems by unfunded individual savings accounts will have a positive impact, at a microeconomic and at a macroeconomic level, and will protect pension systems of the negative consequences of aging. However, these conclusions depend dramatically on the assumptions of rational expectations and perfect information. When we accept the existence of uncertainty, the presumed positive consequences of these reforms disappear, showing the advantages of pay-as-you-go over funded pension systems.

Date: 2011
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DOI: 10.2753/JEI0021-3624450208

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