NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Stability and Growth Pact as an Impediment to Privatizing Social Security

Assaf Razin, Efraim Sadka

NBER Working Paper No. 9278
Issued in October 2002
NBER Program(s):   PE

The aging of the population shakes the confidence in the economic viability of pay-as-you-go social security systems. We demonstrate how in a political-economy framework the shaken cofidence leads to the downsizing of the social security-system, and to the emergence of supplemental individual retirement programs. Lifting the Stability-Pact type ceiling on fiscal deficits is shown to facilitate the transition from a national to a private pension system, through an endogenously determined shift in the median voter.

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Document Object Identifier (DOI): 10.3386/w9278

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