The Political (In)Stability of Funded Pension Systems

Roel Beetsma, Oliwia Komada, Krzysztof Makarski and Joanna Tyrowicz

No 8176, CESifo Working Paper Series from CESifo

Abstract: We analyze the political stability of capital funded social security. In particular, using a stylized theoretical framework we study the mechanisms behind governments capturing pension assets in order to lower current taxes. This is followed by an analysis of the analogous mechanisms in a fully-edged overlapping generations model with intra-cohort heterogeneity. Funding is efficient in a Kaldor-Hicks sense. Individuals vote on capturing the accumulated pension assets and replacing the funded pension pillar with a pay-as-you-go scheme. We show that even if capturing assets reduces welfare in the long run, it always has sufficient political support from those alive at the moment of the vote.

Keywords: funded pensions; asset capture; majority voting; welfare (search for similar items in EconPapers)
JEL-codes: D72 E17 E27 H55 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-age, nep-dge, nep-mac, nep-pbe and nep-pol
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Related works:
Journal Article: The political (in)stability of funded social security (2021)
Working Paper: The Political (In)Stability of Funded Social Security (2021)
Working Paper: The political (in)stability of funded pension systems (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_8176

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