The Transition from a Pay-As-You-Go to a Fully-Funded Social Security System: Is There a Role for Social Insurance?
نویسندگان
چکیده
This paper develops a model to examine the effects of introducing a partially or fully privatized social security system into an overlapping generations model with an extant payas-you-go system. Privatization is introduced through mutual funds that provide an actuarially fair annuity contract as part of a portfolio of assets that bears a random rate of return. We find that in the presence of this investment risk maintaining a portion of the payas-you-go system through a means-tested minimum retirement income guarantee may be welfare improving.
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