Political (In)Stability of Social Security Reform

We analyze the political stability of welfare enhancing privatization of the social security. We consider an economy populated by overlapping generations, who vote on abolishing the funded system and replacing it with the pay-as-you-go scheme, i.e. "unprivatizing" the pension system. We show that even if abolishing the system is overall welfare deteriorating, the cohort distribution of benefits along the transition path turns some ways of "unprivatizing" social security always politically favorable