The Effects of a Fully Funded Pension System on Individual Savings Behaviour
The theoretical and empirical debate about the economic effects of social security and especially pension systems on savings is an unresolved analytical issue in economics. This paper examines the difficulties of theoretically predicting changes in private savings as a result of introducing a fully funded pension system. In order to be able to make any prediction it is necessary to know the behavioural patterns of the individuals in the economy. Since these are difficult to know, it is usual to proceed by assuming that all individuals are alike and behave rationally, and that capital markets adjust supply and demand to an equilibrium where the interest rate clears the markets.
KeywordsSocial Security Pension Fund Real Interest Rate Pension System Social Security System
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