The Effect of Latvian Pension Reform on Savings and Government Budget
AbstractThis paper deals with pension reform’s effect on Latvian savings. We are studying the reaction of total savings and their components on change in the fully funded pillar’s share in the total pension system and on increase of the retirement age using overlapping generations model with many generations. The paper describes both the long-term and the short-term theoretical consequences of the changes in pension legislation. Finally, we evaluate the effect of Latvian pension reform on private savings, fully funded savings and government budget balance over the next 10 years. Model’s simulations show that the increase of the retirement age improves budget balance and total savings, while the introduction of the fully funded pensions redistributes the tax payments from the social budget to fully funded savings.
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Bibliographic InfoArticle provided by Baltic International Centre for Economic Policy Studies in its journal Baltic Journal of Economics.
Volume (Year): 6 (2006)
Issue (Month): 1 (July)
Pension reform; overlapping generations model; savings;
Find related papers by JEL classification:
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
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