Behavioral Economics: Social Security Privatization in Sweden and Chile.


Privatizing social security is a process of replacing the traditional method by introducing a privately managed organization. The economic status of a country is the main factor which decides the privatization of social security. The administration is also an important aspect since privatization requires an efficient administration that can manage social security much better than how the government does.

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This privatization can be achieved by implementing a strategy that ensures that it provides more benefits to the country as a whole.

Though privatization seems to be an easier task, the amount of risk involved is high. The level of positive benefits purely depends on the country and the administration of the government. The risk mainly revolves around the financial market of a country as the economic status plays a major role.

A social security system must be efficiently designed to suit the needs of the country. The governmental policies and laws differ from one country to another and privatization must be done only when these laws and policies can be followed. The financial and the economic status of the country are the major criteria when it comes to privatizing the social security. (Choi, 2003). Once privatized, the social security will not be taken care of by the government. But initial funding and financing must be done by the respective government. Privatization is the private management of the social security but it requires funding from the government. The traditional system does not require external funding, since most of the operations are performed by the government officials. Privatization not only has advantages but it also has certain disadvantages. These disadvantages are considered to be the major reason for several failures. Hence, the numbers of nations which opted for privatization of social security is less when compared to the countries which are have actually considered implementing it, in the initial stages.

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