Prefunding the unfunded system

András Simonovits
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András Simonovits: Hungarian Academy of Scientists

Chapter Chapter 15 in Modeling Pension Systems, 2003, pp 144-158 from Palgrave Macmillan

Abstract: Abstract We have presented Theorem 9.1 (neutrality) in Chapter 9 in its most concise form, which shows that under certain ideal conditions there is a scenario (no pain-no gain), where prefunding an unfunded system can be costless but such a transition is superfluous. This description may not convince everyone because it does not spell out the details and ignores other scenarios. In this Chapter I try to fill these gaps. Presentation of mathematical details will be followed by two other scenarios, double burden and voluntary joining. The three scenarios are analyzed from the cost-benefit viewpoint. We shall use the following three ideal conditions (a) the operating costs and (b) the participation rates of the working age population are the same in both systems; (c) the efficiency of production, the growth rate of output, and the rate of interest are independent of the capital/labor ratio. The assumption of dynamic efficiency r > vg is accepted here.

Keywords: Pension System; Government Debt; Pension Benefit; Lifetime Utility; Double Burden (search for similar items in EconPapers)
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-4039-3845-9_16

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DOI: 10.1057/9781403938459_16

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