Working Paper: NBER ID: w17015
Authors: Kent Smetters; Walter E. Theseira
Abstract: This paper seeks to explain the key two stylized facts of fundamental reforms to social security systems worldwide: Why have so many countries reformed when traditional systems seem, at first glance, to have a higher probability of delivering a secure retirement income? Why have these reforms been larger in developing countries facing less severe demographic problems? We show that an OLG voter model can answer both questions. Larger reforms are motivated by a fundamental breakdown in intergenerational trust while smaller reforms are caused by a lack of trust in the ability of the government to save. Empirical analysis seems to support the model.
Keywords: social security; trust
JEL Codes: H0; H55; D7
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| breakdown in intergenerational trust (D15) | larger reforms in pension systems (H55) |
| lack of trust in government's capability to save (H12) | smaller reforms in pension systems (H55) |
| level of trust in government (H11) | extent of pension reform (H55) |