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PENSION FUNDING IN A UNIONIZED ECONOMY
Author(s) -
Adam Antonis,
Moutos Thomas
Publication year - 2009
Publication title -
scottish journal of political economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.4
H-Index - 46
eISSN - 1467-9485
pISSN - 0036-9292
DOI - 10.1111/j.1467-9485.2009.00481.x
Subject(s) - redistribution (election) , pension , economics , unemployment , pension system , labour economics , unemployment rate , welfare , realization (probability) , pareto principle , small open economy , pareto optimal , overlapping generations model , welfare state , macroeconomics , market economy , finance , operations management , monetary policy , statistics , mathematics , machine learning , politics , political science , computer science , law , multi objective optimization
This paper analyzes the effects of pension funding for a small open economy in which wages are subject to bargaining. Using an overlapping‐generations framework, we show that a reform away from a Pay‐As‐You‐Go towards a funded pension system will be Pareto improving only if the reform results in a reduction in the steady‐state unemployment rate. However, the reduction in the unemployment rate is by no means warranted: although for pension systems which involve a limited amount of intra‐generational redistribution this is likely, for systems displaying a high degree of intra‐generational redistribution the unemployment rate may well rise thus preventing the realization of welfare gains.