ABSTRACT
The reform of the social security system has become one of the main issues of the public debate in many countries. Different versions of the capitalized pension system have been implemented in several countries, like Singapore, Malaysia and Chile. In Spain, workers are bound by law to allocate 24.8 per cent of their gross wage earnings to finance their future pensions. Under the Chilean system, all covered workers must place 10 per cent of their monthly earnings in privately managed savings accounts. In Mexico, the reforms only attracted short run, highly speculative capital, and they were unable to increase the gross savings rate, making it impossible to finance in this way the necessary capital investments required for long run growth. If the government finances pensions through proportional public deficit increases, the output and physical capital gains are substantially smaller but there still exists the possibility of such gains under realistic assumptions.
