General-Equilibrium Effects of Privatisation: The Missing Piece in Social Security Reform

Research output: Working paperDiscussion paperOther research output

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Abstract

This paper analyses the effects of reducing unfunded social security in a closed economy that consists of a service sector and a commodity sector.It is shown that if old agents mainly demand labour intensive services, a modest decrease of the pay-as-you-go pension scheme still raises long-run utility as long as the economy is dynamically efficient.However, entirely privatising the social security system will sooner lead to dynamic inefficiency than in the conventional one-sector model, leading to a different conclusion about the desirability of unfunded pensions.
Original languageEnglish
Place of PublicationTilburg
PublisherMacroeconomics
Number of pages16
Volume2002-24
Publication statusPublished - 2002

Publication series

NameCentER Discussion Paper
Volume2002-24

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General equilibrium
Social security reform
Privatization
Social security
Social security system
Pension scheme
Labour demand
Pay-as-you-go pension
Commodities
Pensions
Service sector
Dynamic inefficiency

Keywords

  • social security
  • pensions
  • privatization
  • overlapping generations

Cite this

van Groezen, B. J. A. M., Meijdam, A. C., & Verbon, H. A. A. (2002). General-Equilibrium Effects of Privatisation: The Missing Piece in Social Security Reform. (CentER Discussion Paper; Vol. 2002-24). Tilburg: Macroeconomics.
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abstract = "This paper analyses the effects of reducing unfunded social security in a closed economy that consists of a service sector and a commodity sector.It is shown that if old agents mainly demand labour intensive services, a modest decrease of the pay-as-you-go pension scheme still raises long-run utility as long as the economy is dynamically efficient.However, entirely privatising the social security system will sooner lead to dynamic inefficiency than in the conventional one-sector model, leading to a different conclusion about the desirability of unfunded pensions.",
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van Groezen, BJAM, Meijdam, AC & Verbon, HAA 2002 'General-Equilibrium Effects of Privatisation: The Missing Piece in Social Security Reform' CentER Discussion Paper, vol. 2002-24, Macroeconomics, Tilburg.

General-Equilibrium Effects of Privatisation : The Missing Piece in Social Security Reform. / van Groezen, B.J.A.M.; Meijdam, A.C.; Verbon, H.A.A.

Tilburg : Macroeconomics, 2002. (CentER Discussion Paper; Vol. 2002-24).

Research output: Working paperDiscussion paperOther research output

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N2 - This paper analyses the effects of reducing unfunded social security in a closed economy that consists of a service sector and a commodity sector.It is shown that if old agents mainly demand labour intensive services, a modest decrease of the pay-as-you-go pension scheme still raises long-run utility as long as the economy is dynamically efficient.However, entirely privatising the social security system will sooner lead to dynamic inefficiency than in the conventional one-sector model, leading to a different conclusion about the desirability of unfunded pensions.

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KW - pensions

KW - privatization

KW - overlapping generations

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