This paper explores how pension reforms in countries with PAYG schemes affect countries with funded systems. We use a two-country two-period overlapping-generations model, where the countries only differ in their pension systems. We distinguish between the case where a reform potentially leads to a Pareto improvement in the PAYG country, and where this is impossible. In the latter case, the funded country shares both in the costs and the benefits of the reform. However, if a Pareto-improving pension reform is feasible in the PAYG country, a Pareto improvement in the funded country is not guaranteed.

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Keywords international spillover effects, pension form
JEL International Investment; Long-Term Capital Movements (jel F21), Open Economy Macroeconomics (jel F41), Forecasting and Simulation (jel F47), Social Security and Public Pensions (jel H55), Debt; Debt Management (jel H63)
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Series ERIM Article Series (EAS)
Journal International Tax and Public Finance
Adema, Y, Meijdam, L, & Verbon, H.A.A. (2009). The international spillover effects of pension reform. International Tax and Public Finance, 16(5), 670–696. doi:10.1007/s10797-008-9084-x