PARETO-IMPROVING PENSION REFORM THROUGH TECHNOLOGICAL INNOVATION

The abolition or reform of unfunded pensions will generally make members of a transitional generation worse-off, because of the "double burden" of funding their own retirement along with that of paying off the unfunded pension liability. Reform will also lower the time-path of interest rates, which will reduce both firms' costs of capital and the rates at which they discount their future profits. Each of these two effects will raise the present value of the gains from technological innovation...