TY  - JOUR
AU  - Sinn,Hans-Werner
TI  - Why a Funded Pension System is Useful and Why It is Not Useful
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7592
PY  - 2000
Y2  - March 2000
UR  - http://www.nber.org/papers/w7592
L1  - http://www.nber.org/papers/w7592.pdf
N1  - Author contact info:
Hans-Werner Sinn
Ifo Institute -
Leibniz Institute for Economic Research
at University of Munich
Poschingerstr. 5
81679 Munich
GERMANY
Tel: 49-89-21802748
Fax: 49-89-397303;49-89-8506434 (home)
E-Mail: sinn@ifo.de
AB  - Based on explicit present value calculations, the paper criticizes the view that the PAYGO system wastes economic resources.  In present value terms, there is nothing to be gained from a transition to funded system even though the latter offers a permanently higher rate of return.  The sum of the implicit and explicit tax burdens that result from the need to respect the existing pension claims is the same under all systems and transition strategies.  Nevertheless a partial transition to a funded system may be a way to overcome the current demographic crisis because it replaces missing human capital with real capital and helps smooth tax and child reading costs across the generations.
ER  -