Privatizing Social Security: A Political-Economy ApproachAssaf Razin and Efraim Sadka The aging of the population shakes the public finance of pay-as-you-go social security systems. We develop a political-economy framework in which this demographic change leads to the downsizing of the social security system, and, as a consequence, to the emergence of supplemental individual retirement programs. Allowing for a one-shot budget deficit, earmarked to accommodate the cost of the social security reforms, is shown to facilitate the political-economy transition from a national to a private pension system. Key words: Dependency ratio; Median voter; Privatization; Individual saving accounts Views expressed in Monetary and Economic Studies are those
of the authors and do not necessarily reflect those of the Bank
of Japan or Institute for Monetary and Economic Studies. |
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