Risk sharing and transition costs in the reform of pension systems in Europe

"Unfunded pay-as-you-go state pension schemes are financially unsustainable in Europe as elsewhere. Proponents of reform argue that, by switching to a fully funded scheme that takes advantage of the high return on assets such as equities, the solvency of the state scheme could be restored at little or no financial burden to current taxpayers. We show that this is mistaken for two reasons." Copyright Centre for Economic Policy Research, Center for Economic Studies, Maison des Sciences de l'Homme, 1999 .