The financing of retirement schemes, savings and growth

This article discusses the various elements affecting the choice between pay-as-you-go systems (with optional capital accumulation) and compulsory capital accumulation systems to finance retirement schemes. The choice of system depends not only on their performance, but also on other elements covered less frequently by analyses, such as the effect on real wages and the real equilibrium interest rate, and various possible imperfections (myopia, limits on debt levels). Attention is also given to the possible explanations for the chronic lack of savings and to how the choice of retirement system may be affected by the weight given to short-term considerations (the ways in which different systems react to economic or demographic fluctuations, for example).