The legislature represents the final battlefield in formal political conflicts over institutional change. As such, it has been the focus of considerable attention by scholars seeking to explain how democratic governments legislate deep, loss-imposing reforms such as pension privatization. This dilemma arises from the fact that loss-imposing legislation such as pension privatization presents elected politicians with significant threats to their careers. Scholars seeking to explain when career-minded legislators vote for such measures have commonly looked to the structure and distribution of legislative authority to explain when majorities form behind such an institutional reform. This research divides quite sharply over whether concentrated or dispersed political authority is more hospitable to the adoption of loss-imposing reform. Neither stream of research, however, has adequately explained how a given configuration of legislative authority could long uphold and stabilize a policy structure, but later permit its fundamental change. The central puzzle in the legislative process of institutional change thus is to explain how, within a given legislative system, political and institutional incentives that long upheld a given old age pension system can later give way to loss-imposing institutional restructuring.
The analysis in Chapter 2 challenged existing knowledge on this question. First, the statistical result showed that the effect of legislative institutions on pension privatization is conditional: As the size of the governing majority increases the likelihood of pension privatization diminishes, except when a left party is in power; in that case, privatization becomes more likely as left-party majorities increase. The cross-national analysis also showed, however, that left parties systematically adopt smaller movements toward market-based pension provision.