The paper seeks to explain the huge cross country variation in private pension funding, shaped by historical choice made when universal pension systems were created after the Great Depression. According to Perotti and von Thadden (2006), large inflationaryshocks due to war damage devastated middle class savings in some countries in the first half of the XX century. This shaped political preferences over the role of capital markets and social insurance, and contributed to the Great Reversals documented by Rajan andZingales (2003). Wealth distribution shocks are indeed strongly related to private pension funding, as a large shock reduces the stock of private retirement assets by 58% of GDP.While the sample size is limited, the results are robust to other explanations, such as legal origin, original financial development, past and current demographics, religion, electoral voting rules, redistributive politics, national experiences with financial marketperformance, or other major financial shocks that were not specifically redistributive.Corroborating evidence indicates that such redistributive shocks help explain the cross country variation in social expenditures, state ownership of industry, financial development and employment protection measures as predicted by the political shift hypothesis.

Netspar, Network for Studies on Pensions, Aging and Retirement, is een denktank en kennisnetwerk. Netspar is gericht op een goed geïnformeerd pensioendebat.

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