Can and Should a Pay-As-You-Go Pension System Mimic a Funded System?

John Hassler and Assar Lindbeck

No 499, Working Paper Series from Research Institute of Industrial Economics

Abstract: This paper considers the possibility of letting a pay-go pension system mimic a fully funded pension system. Generically, it turns out to be impossible to make a less than fully funded pension system actuarially fair on average. But a non-funded pay-go pension system can provide an actuarially fair implicit return on the margin, which increases economic efficiency. The benefits of this fall entirely on current pensioners as a windfall gain unless compensating transfers are implemented. Such a system can be thought of as a pay-go system that mimics a fully funded pension system in combination with lump transfers to current pensioners from current and future workers.

Keywords: Pension systems; Pay-as-you-go; Actuarial; Funding (search for similar items in EconPapers)
JEL-codes: H50 H55 H60 (search for similar items in EconPapers)
Pages: 18 pages
Date: 1998-06-04
New Economics Papers: this item is included in nep-pbe and nep-pub
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