Politics within paths: trajectories of Danish and Swedish earnings-related pensions

Abstract

This article investigates earnings-related pension schemes in Denmark and Sweden with a focus on the last two decades. It takes the path dependency idea as its starting point and develops it further with regard to pension politics. In the Danish case, the article shows that existing funded, occupational pension schemes precluded a pay-as-you-go (PAYGO) solution for workers not already covered due to a ‘reverse double payment problem’. Political attention centred instead on broadening the coverage of occupational schemes. The article demonstrates that the development of funded pension systems also shows a great deal of path dependency. In the Swedish case, we provide a detailed empirical investigation which shows how the double payment problem affects the positions of political parties, rather than the entire reform process. The study thus argues that the political parties were the crucial actors in the Swedish pension reform and that the path dependency facilitated a consensual reform process because it made irrelevant a more fundamental party political disagreement over the pension system.