Are funding of pensions and economic growth directly linked? New empirical results for some OECD countries

We empirically test on a panel of OECD countries the hypothesis of a direct and positive link between funding of pensions and economic growth, which is based on the idea that richer pension systems can accelerate the development of the financial system and thus promote a more efficient capital allocation. We follow Davis and Hu (2008) in estimating a modified Cobb-Douglas production function where pension fund assets are treated as a shift factor, but in line with the recent econometric literature we control for common global shocks driving per capita outputs. Therefore we adopt a more general approach suitable to the presence of a multifactor error structure. The previous evidence of a long run cointegration relationship between autonomous (or total) pension fund assets and per capita output for our panel of OECD countries is not robust to our augmented specification.