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The Pension Scheme in Vietnam: Current Status and Challenges in an Aging Society

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  • Giang, Thanh Long

Abstract

The publicly-managed Pay-As-You-Go (PAYG) defined-benefit pension scheme in Vietnam is described, with an analysis of its financial sustainability in the context of an aging society in a dynamically efficient economy. By using actuarial models developed by the International Labor Organization (ILO), the paper finds that the implicit pension debt (IPD) of the scheme is high in comparison with GDP of the year 2000, which is the base year for projections. Regarding the social aspect, a high IPD implies that the burden of maintaining this scheme is borne by the current and future participants. For this reason, the pension scheme in Vietnam will cause not only financial instability but also inter-generational inequity. In order to avoid this situation, the current scheme needs to be reformed. In particular, Vietnam should move to a partially-funded defined-contribution scheme with careful considerations of social and economic impacts so as to avoid both financial instability and inter-generational inequity.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 969.

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Date of creation: Apr 2004
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Handle: RePEc:pra:mprapa:969

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Keywords: aging population; pension scheme; pension debt; financial sustainability; Vietnam;

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References

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  1. Noriyuki Takayama & Yukinobu Kitamura & Hiroshi Yoshida, 1999. "Generational Accounting in Japan," NBER Chapters, in: Generational Accounting around the World, pages 447-470 National Bureau of Economic Research, Inc.
  2. Martin Feldstein & Jeffrey B. Liebman, 2001. "Social Security," NBER Working Papers 8451, National Bureau of Economic Research, Inc.
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  3. Olivier J. Blanchard & Philippe Weil, 2001. "Dynamic Efficiency, the Riskless Rate, and Debt Ponzi Games under Uncertainty," Sciences Po publications info:hdl:2441/8607, Sciences Po.
  4. Laurence J. Kotlikoff & Willi Leibfritz, 1998. "An International Comparison of Generational Accounts," NBER Working Papers 6447, National Bureau of Economic Research, Inc.
  5. Jagadeesh Gokhale, 1996. "Demographic change, generational accounts, and national saving in the United States," Working Paper 9603, Federal Reserve Bank of Cleveland.
  6. Robert P. Hagemann & Giuseppe Nicoletti, 1989. "Ageing Populations: Economic Effects and Implications for Public Finance," OECD Economics Department Working Papers 61, OECD Publishing.
  7. Oshio, Takashi, 2002. "Net Pension Liabilities, Intergenerational Equity, and Pension Reforms," Discussion Paper 131, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  8. Alan J. Auerbach & Laurence J. Kotlikoff & Robert P. Hagemann & Giuseppe Nicoletti, 1989. "The Economic Dynamics of an Ageing Population: The Case of Four OECD Countries," OECD Economics Department Working Papers 62, OECD Publishing.
  9. 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.
  10. Paul van den Noord & Richard Herd, 1993. "Pension Liabilities in the Seven Major Economies," OECD Economics Department Working Papers 142, OECD Publishing.
  11. Holzmann, Robert & Palacios, Robert & Zviniene, Asta, 2004. "Implicit pension debt: issues, measurement and scope in international perspective," Social Protection Discussion Papers 30153, The World Bank.
  12. Martin Mühleisen & Hamid Faruqee, 2001. "Population Aging in Japan," IMF Working Papers 01/40, International Monetary Fund.
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Citations

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Cited by:
  1. Giang, Thanh Long & Pfau, Wade Donald, 2008. "Demographic Changes and Pension Finances in Vietnam," MPRA Paper 9931, University Library of Munich, Germany.
  2. Giang Thanh Long & Wade D. Pfau, 2008. "Demographic Changes And The Long-Term Pension Finances In Vietnam: A Stochastic Actuarial Assessment," GRIPS Discussion Papers 08-05, National Graduate Institute for Policy Studies.
  3. Nguyen, Cuong & Van den Berg, Marrit, 2009. "The Impact of Public Transfers on Poverty and Inequality: Evidence from rural Vietnam," MPRA Paper 48671, University Library of Munich, Germany.
  4. Giang, Thanh Long & Pfau, Wade Donald, 2008. "Determinants of Elderly Poverty in Vietnam," MPRA Paper 9927, University Library of Munich, Germany.
  5. Giang, Thanh Long, 2005. "Pension Liabilities and Generational Relations: The Case of Vietnam," MPRA Paper 970, University Library of Munich, Germany, revised Mar 2006.
  6. Nguyen Viet Cuong, 2013. "The Impact of Social Security on Household Welfare: Evidence from a Transition Country," The European Journal of Development Research, Palgrave Macmillan, vol. 25(5), pages 737-757, December.

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