This paper analyses the consequences of a switch to a more funded pension scheme for economic growth inan economy that consists of a capital-intensive commodity sector with endogenous growth and a labourintensive services sector. The increased savings cause long-run growth to be higher in a closed economy,provided capital and labour are not strong substitutes. The reverse holds for a small open economy. Morefunding can therefore turn out to be a curse instead of a blessing for future generations, unless countriesimplement their reforms simultaneously or impose a tax on labour-intensive services.
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