Ageing, pension reforms and capital market development in transition countries
AbstractThis paper gives an overview of demographic trends and their impact on public finances in transition countries. It also describes the pension reforms that have been carried out and the impact of multi-pillar pension reforms on capital market developments. We show that the transition countries face more severe demographic pressures than comparable emerging market economies, and that there is a cause for concern that they may ‘grow old before they grow rich’. Their government finances therefore have to cope with a rising strain on public social security systems. We argue that multi-pillar pension reform is not a cure-all for this problem. Multi-pillar systems are costly to introduce, as pension contributions previously used to finance the public pension liabilities are diverted to the funded pillars. They also change the risk-profile of the pension schemes, as the intergenerational risk-sharing of the public system is replaced by risk-sharing through financial markets. Parametric reform to public pension systems continues to be a viable policy alternative. The necessity of parametric reforms is underscored by data on asset allocations of mandatory pension funds in the transition countries, showing that limited diversification of assets can undermine the actual impact of multi-pillar reform on fiscal sustainability.
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Bibliographic InfoPaper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 99.
Length: 35 pages
Date of creation: Dec 2006
Date of revision:
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More information through EDIRC
Ageing; Pension Reform; Pension Funds; Capital Markets;
Find related papers by JEL classification:
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- P35 - Economic Systems - - Socialist Institutions and Their Transitions - - - Public Finance
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.:
- Olivia S. Mitchell & John Piggott & Michael Sherris & Shaun Yow, 2006.
"Financial Innovation for an Aging World,"
NBER Working Papers
12444, National Bureau of Economic Research, Inc.
- Orazio P. Attanasio & Susann Rohwedder, 2003. "Pension Wealth and Household Saving: Evidence from Pension Reforms in the United Kingdom," American Economic Review, American Economic Association, vol. 93(5), pages 1499-1521, December.
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