Reforming the Beast – The Nature of Pension Reform

Abstract

One of the main premises of this dissertation is that reform of a PAYG pension system is a purely redistributional issue. It therefore always entails winners and losers who cannot be compensated for their losses. This is quite important, as the underlying political dynamic in this case is quite different as compared to a policy shift that is efficient according to the Pareto or Kaldor-Hicks principle. In the latter case, the political problem is ’merely’ how to distribute the gains, no one is made worse off.