Is there an optimal pension share of GDP?

This topic is the subject of a lively debate in France, where the pension share of GDP is significantly higher than in the other euro-zone countries (around 14% versus around 10%) and where the government is trying to gradually reduce it. What are the important points of the analysis? The question of the pension share of GDP matters whether the pension system is pay-as-you-go (in which case wage incomes are levied ) or funded (in which case capital income is levied); it is a question of generations’ preference for the present or future; If the share of pay-as-you-go pensions in GDP is high, there is a large transfer from the “young” to the “old”. This normally leads to a lower savings rate among the young. The question for a country like France with a high weight of pay-as-you-go pensions is whether this has led to an abnormal fall in the savings rate or the investment rate. The answer is no; The question of how pay-as-you-go pensions are financed is important. In France, the weight of pensions leads to a high weight of corporate social contributions, which reduces the employment rate. It is a bad idea to finance pensions with a distortionary tax. Altogether, we have the impression that the priority in France is not to reduce the pension share of GDP but to modify how pensions are financed so that they no longer rel y fully on a distortionary tax that hamper s employment. In addition, increasing the weight of funded pensions in France cannot be justified by a savings shortfall , but can be justified by the higher return on a funded system.