If the return on equity was equal to the growth rate, pay-as-you-go and funded pensions would be equal

If the return on equity was equal to the growth rate (which is often symbolically written as r=g), implementing funded or pay-as-you-go pension systems would be equivalent. This is because: The returns of both systems would be identical; Population ageing negatively affects both pension systems; If growth becomes weaker, the return on pay-as-you-go pensions is reduced, but also on funded pensions: the risks of the two systems are highly correlated. But we see that the return on equity has for a long time been higher than the growth rate (which is written as r>g): this gives a structural advantage to funded over pay-as-you-go pensions. We illustrate our analysis by the case of the euro zone.