ABSTRACT
This chapter investigates dynamic implications of pension contributions and intergenerational transfers under modified funded systems. By incorporating interest groups’ contributions to social security funds into the conventional overlapping generations model, the model explores the longterm effects of public spending, social security fund, and economic growth. Good economic conditions will not necessarily lead to high growth of pension funds. The pension fund is too little in terms of static efficiency (or compared with private consumption) but may be too much or too little in terms of the dynamic efficiency (or as the steady state level). We finally examine the normative role of taxes (and subsidies) on consumption and pension contributions.
