The Politics of Pension Reform Under Ageing

35 Pages Posted: 14 Aug 2001

See all articles by Theo Leers

Theo Leers

Tilburg University - Department of Economics

A. C. Meijdam

Tilburg University - Center for Economic Research (CentER); Tilburg University - Department of Economics

Harrie A. A. Verbon

Tilburg University - CentER; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: July 2001

Abstract

In this paper we address the question whether in case of population ageing a transition from an unfunded to a more funded pension scheme is politically feasible in a representative democracy. We consider two parties: a right-wing party which is willing to trade off intragenerational equity against efficiency gains in intergenerational redistribution, and a left-wing party which does not want to adjust the level of intragenerational distribution. We show that, in an economy with an exogenously given interest rate, only a thus defined right-wing government will propose a social-security reform. Moreover, we demonstrate that such a policy proposal may lead to electoral success if it entails an appropriate mix of distributional efficiency and equity.

Keywords: Ageing, Overlapping Generations, Pensions

JEL Classification: J14, H55

Suggested Citation

Leers, Theo and Meijdam, A.C. (Lex) and Verbon, Harrie A. A., The Politics of Pension Reform Under Ageing (July 2001). Available at SSRN: https://ssrn.com/abstract=277367

Theo Leers

Tilburg University - Department of Economics

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

A.C. (Lex) Meijdam

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 23 85 (Phone)
+31 13 466 30 42 (Fax)

Tilburg University - Department of Economics

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Harrie A. A. Verbon (Contact Author)

Tilburg University - CentER ( email )

Department of Economics
P.O. Box 90153
5000 LE Tilburg
Netherlands
+31 13 466 28 78 (Phone)
+31 13 466 30 42 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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