The political feasibility of pension reform options: the case of Switzerland

This paper investigates the political feasibility of different hypothetical reform options of an unsustainable pay-as-you-go public pension system. in calibrating the model to the Swiss economy, we find that low internal rate s of return and high distortions can reduce political support for an increa se in earmarked taxes, up to a point where a reduction in the size ai the s ocial security program receives a majority of votes. Our simulations show t hat the consideration of non-social security taxes is crucial in welfare an alysis. This is especially true for countries in which the public pension s ystem is explicitly or implicitly subsidized. (C) 2000 Elsevier Science S.A . All rights reserved. JEL classification: H55; D91; D72.