DP3621 The Stability and Growth Pact as an Impediment to Privatizing Social Security
|Author(s):||Assaf Razin, Efraim Sadka|
|Publication Date:||November 2002|
|Keyword(s):||ageing, budget deficit, individual retirement accounts, median voter, pay-as-you-go social security|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=3621|
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.