Optimal Design Of Social Security Reforms
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Overview: This research paper studies the optimal design of a social security privatization in a Pareto improving way. The government decides endogenously how to finance the transition and the welfare of the initial generations alive becomes policy constraint. Researchers find that the government can design a Pareto improving reform that exhibits sizeable welfare gains, arising because of a reduction in labor supply distortions. In contrast, the welfare gain from reducing savings distortions is relatively small. Their approach explicitly provides quantitative policy prescriptions towards the policy design of future and maybe unavoidable social security reforms.