ABSTRACT
This chapter explores some of the thinking on the factors that influence international competitiveness and the role that might be played by social security programs. It discusses the relationship between pension contribution rates and employer costs and the institutional and economic conditions which might cause high pension contribution rates to undermine international competitiveness. Both economic theory and empirical studies suggest that where product markets, labor markets, and foreign exchange markets are allowed to operate fairly freely, pension contribution rates are unlikely to have any particular relationship with international competitiveness. Statistical correlations relating one set of international competitiveness scores to measures of social security spending and employer contribution rates suggest the presence of both positive influences from spending and negative influences from employer contributions. Financing generous social security programs requires that a government levy high tax and/or social insurance contribution rates, which can translate into high contribution charges levied on a nation’s employers.
