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New Models for Old-Age Security: Experiments, Evidence, and Unanswered Questions

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  • James, Estelle
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    Abstract

    The escalating costs of traditional social security systems are forcing countries to reevaluate the formal programs that provide income maintenance support to the aging. This article suggests a reform strategy built around three systems, or "pillars," to provide old-age security-a public pillar with mandatory participation, a private, mandatory savings plan, and a voluntary savings system. Three variations of this model are being implemented in different countries: the Latin American model, in which individual workers choose an investment manager for their retirement funds; the OECD model, in which employers, union trustees, or both choose the investment manager for an entire company or occupation; and the Swedish notional account model, in which there are no funds to invest. Preliminary empirical evidence on the efficiency and growth effects of pension reform, mostly from Chile, indicates that the impact on national saving and financial market development and, through these, economic growth, has been positive and possibly large.

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    Bibliographic Info

    Article provided by World Bank Group in its journal World Bank Research Observer.

    Volume (Year): 13 (1998)
    Issue (Month): 2 (August)
    Pages: 271-301

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    Handle: RePEc:oup:wbrobs:v:13:y:1998:i:2:p:271-301

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    1. Olivia S. Mitchell, . "Administrative Costs in Public and Private Retirement Systems," Pension Research Council Working Papers 96-4, Wharton School Pension Research Council, University of Pennsylvania.
    2. Morande, Felipe G., 1998. "Savings in Chile. What went right?," Journal of Development Economics, Elsevier, vol. 57(1), pages 201-228, October.
    3. A. Javier Hamann, 1997. "The Reform of the Pension System in Italy," IMF Working Papers 97/18, International Monetary Fund.
    4. Robert Holzmann, 1997. "Fiscal Alternatives of Moving from Unfunded to Funded Pensions," OECD Development Centre Working Papers 126, OECD Publishing.
    5. Friedman, Barry & James, Estelle & Kane, Cheikh & Queisser, Monika, 1996. "How can China provide income security for its rapidly aging population?," Policy Research Working Paper Series 1674, The World Bank.
    6. Felipe Morandé, 1996. "Savings in Chile: What Went Right?," IDB Publications 5922, Inter-American Development Bank.
    7. Whitehouse, Edward, 1998. "Pension reform in Britain," Social Protection Discussion Papers 20053, The World Bank.
    8. Edward M. Gramlich, 1996. "Different Approaches for Dealing with Social Security," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 55-66, Summer.
    9. Corsetti, Giancarlo & Schmidt-Hebbel, Klaus, 1995. "Pension reform and growth," Policy Research Working Paper Series 1471, The World Bank.
    10. Palacios, Robert & Rocha, Roberto, 1998. "The Hungarian pension system in transition," Social Protection Discussion Papers 20048, The World Bank.
    11. repec:fth:inadeb:322 is not listed on IDEAS
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    Cited by:
    1. Gora, Marek & Rutkowski, Michal, 1998. "The quest for pension reform : Poland's security through diversity," Social Protection Discussion Papers 20111, The World Bank.
    2. Gupta Ramesh, . "Pension Reforms in India: Myth, Reality and Policy Choices," IIMA Working Papers WP2002-09-03, Indian Institute of Management Ahmedabad, Research and Publication Department.

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