Political sustainability of unfunded pensions in an endogenous growth model


Kwiek, Maksymilian (2007) Political sustainability of unfunded pensions in an endogenous growth model. B.E. Journal of Macroeconomics, 7, (1), 1-13.

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Description/Abstract

Cooley and Soares (1999) show that a pay-as-you-go pension system can be an outcome of a political equilibrium and rather relatively large size of it can be introduced. This note assumes endogenous growth model rather than the exogenous one, which establishes a link between savings rate and economic growth. Since the introduction of the pay-as-you-go system lowers the savings rate, it has an adverse effect on growth rate and hence on future pensions. When this additional incentive is taken into account, then the level of pay-as-you-go system chosen in political equilibrium is much lower than in exogenous growth model of Cooley and Soares. Still their qualitative conclusion holds, at least some level of pay-as-you-go system will be introduced in equilibrium.

Item Type: Article
ISSNs: 1935-1690 (print)
Related URLs:
Keywords: pension system, endogenous growth, political equilibrium, reform
Subjects: H Social Sciences > HB Economic Theory
Divisions: University Structure - Pre August 2011 > School of Social Sciences > Economics
ePrint ID: 39656
Date Deposited: 29 Jun 2006
Last Modified: 14 Apr 2014 09:36
URI: http://eprints.soton.ac.uk/id/eprint/39656

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