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Is There A Link Between Pension-Fund Assets And Economic Growth? - A Cross-Country Study

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E Philip Davis ()
Yuwei Hu ()

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Abstract

Pension fund assets have increased markedly during recent decades, and there are signs that this trend will continue, particularly given demographic changes and the current pattern of pension reform towards funded systems. However, research on the extent to which growth in pension assets contributes directly to economic growth is quite scarce. This is surprising since superiority of funding to pay-as-you-go links notably to the question whether funding improves economic performance sufficiently to generate the resources required to meet the needs of an ageing population. In this paper, we design a modified Cobb-Douglas production function with pension assets as a shift factor. We then employ a dataset covering 38 countries to investigate the direct link between pension assets and economic growth, using a variety of appropriate econometric methods. We find positive results for both OECD countries and Emerging Market Economies (EMEs), with some evidence for a larger effect for EMEs than OECD countries.

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Paper provided by Economics and Finance Section, School of Social Sciences, Brunel University in its series Economics and Finance Discussion Papers with number 04-23.

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Length: 41 pages
Date of creation: Dec 2004
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Handle: RePEc:bru:bruedp:04-23

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  6. Alicia H. Munnell, 2004. "Population Aging: It's Not Just The Baby Boom," Issues in Brief ib16, Center for Retirement Research. [Downloadable!]
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  7. Bond, Stephen Roy & Hoeffler, Anke & Temple, Jonathan, 2001. "GMM Estimation of Empirical Growth Models," CEPR Discussion Papers 3048, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  8. Beck, Thorsten & Levine, Ross & Loayza, Norman, 2000. "Finance and the sources of growth," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 261-300. [Downloadable!] (restricted)
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  16. Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May. [Downloadable!] (restricted)
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  19. Eduardo Walker & Fernando Lefort, 2002. "Pension Reform And Capital Markets: Are There Any (Hard) Links?," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 5(2), pages 77-149. [Downloadable!]
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  22. Kaddour Hadri, 2000. "Testing for stationarity in heterogeneous panel data," Econometrics Journal, Royal Economic Society, vol. 3(2), pages 148-161.
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  23. Impavido, Gregorio & Musalem, Alberto R. & Tressel, Thierry, 2003. "The impact of contractual savings institutions on securities markets," Policy Research Working Paper Series 2948, The World Bank. [Downloadable!]
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  25. McCoskey, Suzanne & Kao, Chihwa, 1999. " Testing the Stability of a Production Function with Urbanization as a Shift Factor," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 671-90, Special I. [Downloadable!] (restricted)
  26. Nelson C. Mark & Donggyu Sul, 2003. "Cointegration Vector Estimation by Panel DOLS and Long-run Money Demand," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(5), pages 655-680, December. [Downloadable!] (restricted)
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  27. : Klaus Schmidt-Hebbel, 1998. "Does Pension Reform Really Spur Productivity, Saving, and Growth?," Working Papers Central Bank of Chile 33, Central Bank of Chile. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Gonçola Monteiro & Cecilia Posadas Pérez, 2006. "Pension Reform and Financial Markets in Mexico: An Econometric Analysis," Discussion Papers 06/25, Department of Economics, University of York, revised Mar 2007. [Downloadable!]
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