Pareto Improving Transition from a Pay-as-You-Go to a Fully Funded Pension System in a Model of Endogenous Growth: The Impact of Uncertainty

30 Pages Posted: 23 May 2010

See all articles by Katarzyna Romaniuk

Katarzyna Romaniuk

Université de Paris 1 Panthéon-Sorbonne; Xi'an Jiaotong-Liverpool University (XJTLU)

Date Written: March 10, 2009

Abstract

This paper analyzes the transition from a pay-as-you-go to a fully funded pension system within the framework of endogenous growth in the presence of uncertainty. Gyárfás and Marquardt (2001) prove the possibility of a Pareto improving conversion in a certain world. Two distinct kinds of uncertainty are being analyzed in this paper: an uncertain global productivity and uncertain wages. The main result states that a Pareto improving transition is not always possible in case of uncertain wages: The amount of precautionary savings, accumulated because of the presence of uncertainty, will constitute the determining factor.

Keywords: pensions, transition, endogenous growth, uncertainty, precautionary savings

JEL Classification: H55

Suggested Citation

Romaniuk, Katarzyna, Pareto Improving Transition from a Pay-as-You-Go to a Fully Funded Pension System in a Model of Endogenous Growth: The Impact of Uncertainty (March 10, 2009). Available at SSRN: https://ssrn.com/abstract=1613251 or http://dx.doi.org/10.2139/ssrn.1613251

Katarzyna Romaniuk (Contact Author)

Université de Paris 1 Panthéon-Sorbonne ( email )

17, rue de la Sorbonne
Paris, 75005
France

Xi'an Jiaotong-Liverpool University (XJTLU) ( email )

111 Renai Road, SIP
Suzhou, JiangSu province 215123
China

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