Transition between pension systems

Because of worldwide aging and slowdown of productivity increase, most experts consider the pension problem as threatening or even critical. (There are few econornists—for example, Razin et al. (2002) —who claim that aging will diminish rather than increase social transfers!) Most experts see the solution in the revival of the funded system, if not fully then at least in part (for example, Feldstein, 1974; Auerbach et al., 1989; Feldstein-Samwick, 1998 and Disney, 2000). Other economists (for example, Augusztinovics, 1995; Diamond, 1997 and Orszag-Stiglitz, 2001), disagree with the pessimists and seek to mend rather than replace the existing unfunded public pension systems. I too belong to this group. This chapter starts with the general argument, then illustrates its points using the examples of two countries, Chile and Hungary. Chapter 15 supplies the details.