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A Case for Partial Funding of Pensions with an Application to the EU Candidate Countries

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  • Heikki Oksanen
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    Abstract

    The paper examines the effects of ageing and makes a case for partial pre-funding of pensions. The argument is based on inter-generational fairness in a situation where pension expenditure as compared to wages increases due to low fertility and increasing longevity. We illustrate the approach by using data representing a typical EU Candidate Country of Central and Eastern Europe with a relatively high pension replacement rate. Pre-funding can take place within the public sector or in a privatised second pillar. We emphasise the need for a consistent framework to cover the many different institutional options available for pension financing.

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    File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2001/wp-cesifo-2001-04/cesifo_wp466.pdf
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    Bibliographic Info

    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 466.

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    Date of creation: 2001
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    Handle: RePEc:ces:ceswps:_466

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    Keywords: Pension system reform; partial pre-funding; ageing;

    References

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    1. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324 Elsevier.
    2. Jukka Lassila & Tarmo Valkonen, 2002. "Prefunding in a Defined Benefit Pension System: The Finnish Case," NBER Chapters, in: Social Security Pension Reform in Europe, pages 263-290 National Bureau of Economic Research, Inc.
    3. Robin Brooks, 2000. "What Will Happen To Financial Markets When The Baby Boomers Retire?," Computing in Economics and Finance 2000 92, Society for Computational Economics.
    4. Jukka Lassila & Tarmo Valkonen, 2001. "Pension Prefunding, Ageing, and Demographic Uncertainty," International Tax and Public Finance, Springer, vol. 8(4), pages 573-593, August.
    5. Sheetal K. Chand & Albert Jaeger, 1996. "Aging Populations and Public Pension Schemes," IMF Occasional Papers 147, International Monetary Fund.
    6. Hans-Werner Sinn, 1997. "The Value of Children and Immigrants in a Pay-As-You-Go Pension System: A Proposal for a Partial Transition to a Funded System," NBER Working Papers 6229, National Bureau of Economic Research, Inc.
    7. N. A. Barr, 2000. "Reforming Pensions," IMF Working Papers 00/139, International Monetary Fund.
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    Cited by:
    1. Heikki Oksanen, 2001. "Pension Reforms for Sustainability and Fairness," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 2(4), pages 12-18, October.
    2. K. Mc Morrow & W. R�ger, 2002. "EU pension reform - An overview of the debate and an empirical assessment of the main policy reform options," European Economy - Economic Papers 162, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
    3. Sinn, Hans-Werner, 2005. "Europe's Demographic Deficit," Munich Reprints in Economics 934, University of Munich, Department of Economics.
    4. Heikki Oksanen, 2003. "Population ageing and public finance targets," European Economy - Economic Papers 196, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
    5. Evelin, Ahermaa & Luigi, Bernardi, 2004. "Tax polici in new EU members: Estonia and othr Baltic states," MPRA Paper 18158, University Library of Munich, Germany.
    6. Hans-Werner Sinn, 2005. "Europe’s Demographic Deficit A Plea For A Child Pension System," De Economist, Springer, vol. 153(1), pages 1-45, December.

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