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Discussion Paper Details

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

Author(s): Assaf Razin and Efraim Sadka

Publication Date: November 2002

Keyword(s): ageing, budget deficit, individual retirement accounts, median voter and pay-as-you-go social security

Programme Area(s): International Macroeconomics

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.

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Bibliographic Reference

Razin, A and Sadka, E. 2002. 'The Stability and Growth Pact as an Impediment to Privatizing Social Security'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3621