The Political (In)Stability of Funded Pension Systems
By Roel M. W. J. Beetsma, Oliwia Komada, Krzysztof Makarski, Joanna Tyrowicz 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...