This article presents a simple condition for optimal coordination of social security policies in the union of two open economies employing different production functions and within which capital and labour are fully mobile. We find that if both countries run fully funded pension schemes, the...

This paper presents a simple condition for optimal coordination of social security policies in case where countries employ different production functions and capital and labour are fully mobile. We find that if both countries run fully funded pension schemes, an allocation of labour and capital...

Many EU states have adjusted pension benefits or reformed the pension system in reaction to the recent economic crisis, while other member states have postponed this type of adjustments. In this paper we analyse the welfare effects of these different reactions to the crisis in an economic union....