Abstract
Over 20 years ago, in a paper called “Myths My Grandpa Taught Me” (Barr, 1979), I attacked the conventional view that funded schemes are less vulnerable to demographic pressures than PAYG schemes. Since then a major debate has erupted about the desirability of a move towards private, funded pensions. This paper starts by setting out the simple economics of pensions (which are much simpler than they are frequently portrayed); drawing on those analytics, the second section seeks to answer two questions: does a move to funding address the problems of population ageing; and would such a move help to contain public spending? As will become clear, I am doubtful about both claims
The arguments in this paper are set out more fully in Barr (2001, Chapters 6 to 9), which integrates them within the broader microeconomic foundations of the welfare state.
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References
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Barr, N. (2003). Population Ageing — A Problem Not a Crisis. In: Aiginger, K., Hutschenreiter, G. (eds) Economic Policy Issues for the Next Decade. Springer, Boston, MA. https://doi.org/10.1007/978-1-4757-5046-1_7
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DOI: https://doi.org/10.1007/978-1-4757-5046-1_7
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