Funding of pensions and economic growth: Are they really related?

We show empirically that there is no relation between funding of pensions and economic growth in a sample of OECD- as well as non-OECD countries over the period 2001-2008. This finding contradicts findings of earlier studies, which do not control for capital market returns of pension funds. Our estimation procedure consists of two steps: In the first step we explain the change in the pension assets/GDP ratio by capital market returns of pension fundsand demographic developments. In the second step we estimate a dynamicgrowth regression with the residual from the first step-regression as a proxy for funding.