Pascal Belan

Pareto-Improving Social Security Reform

It is generally accepted that moving from an unfunded to a funded social security system implies a welfare loss for the transition generation—that is, the generation that has to pay twice: first, saving for its own retirement and, second, contributing to the pensions of the then retired generation. This article shows that in a setting of endogenous growth with positive externality such a transition can be Pareto improving. But it argues also that social security reform is more a pretext than a requirement for internalizing such a positive externality.

Privatizing social security: a critical assessment

The purpose of this paper is to provide a critical evaluation of theoretical models showing that shifting from pay-as-you-go to fully funded social security schemes can be made Pareto-improving. Further, it argues that what often makes a reform towards funded schemes attractive is a number of additional features that could also have been introduced in the unfunded social security system.The paper is organized in three main sections. The first one presents a taxonomy of social security systems; this allows us to show that in privatization programmes the issue is not just moving from unfunded to funded mechanisms but also, and above all, to individualize the system in such a way that there is no more redistribution. The second shows that funded and pay-as-you-go schemes are equivalent as long as the payroll taxes paid during the period of inception of the pay-as-you-go scheme are duly invested. Finally, the third section presents two models of Pareto-improving social security reforms and discusses the assumptions on which they rely.

Transition vers un système par capitalisation dans un modèle de croissance endogène

We study the transition from an unfunded to a funded pension system in an endogenous growth overlapping generations model (with positive externality of aggregate capital stock on individual producers). We suppose that workers have different skill levels. We distinguish cases where the initial unfunded system provides either uniform or past wage decreasing replacement rates. In the first case, a saving-fostering subsidy can make both transition generations and future generations better off. In the second case, the shift in saving return may be insufficient to realize a Pareto-improving reform. Then one needs to keep a intragenerational redistribution scheme. Classification JEL : H55, O41, D9, J1

Capital Accumulation, Welfare, and the Emergence of Pension-Fund Activism

This paper presents an overlapping generations model with altruistic consumers, in which pension funds, by holding a signi...cant share of capital assets, produce non competitive behavior. We study the consequences of such behavior on capital accumulation and welfare in the long run when subsidies are associated with contributions to pension funds. If bequests are operative and the subsidy rate is not too high, the capital stock increases with the introduction of pension funds, and this increases long run utility. If bequests are not operative without pension funds, the rise in long-run welfare is no longer guaranteed, even if the subsidy rate is low.