The Stability and Growth Pact as an Impediment to Privatizing Social Security

Assaf Razin and Efraim Sadka

No 3621, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The ageing of the population shakes the confidence in the economic viability of pay-as-you-go social security systems. We demonstrate how in a political-economy framework the shaken confidence leads to the downsizing of the social security-system, and to the emergence of supplemental individual retirement programs. Lifting the Stability Pact-type ceiling on fiscal deficits is shown to facilitate the transition from a national to a private pension system, through an endogenously determined shift in the median voter.

Keywords: Ageing; Budget deficit; Median voter; Pay-as-you-go social security; Individual retirement accounts (search for similar items in EconPapers)
JEL-codes: H00 (search for similar items in EconPapers)
Date: 2002-11
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Citations: View citations in EconPapers (18)

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Working Paper: The Stability and Growth Pact as an Impediment to Privatizing Social Security (2002)
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