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Public Sector Pension Policies and Capital Accumulation in Emerging Economies

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Author Info

  • Gerhard Glomm

    ()
    (Department of Economics, Indiana University, Bloomington)

  • Juergen Jung

    ()
    (Department of Economics, Towson University)

  • Changmin Lee

    ()
    (Department of Economics, Indiana University, Bloomington)

  • Chung Tran

    ()
    (School of Economics, University of New South Wales)

Abstract

In many emerging economies pension programs of public sector workers are more generous than pension programs of private sector workers. In this paper we investigate public pension reforms that improve efficiency and welfare by reallocating government resources from non-productive public pensions to productive public education and infrastructure investments. We argue that the opportunity costs of running generous public pension schemes for civil servants are potentially large in emerging economies that often suffer from low public investments in education and infrastructure. In addition, we quantitfy the savings distortions as well as the tax distortions from running a generous public pension program. Calculating transitions to the post-reform steady state, we find that welfare losses for the generation born before the reform are offset by welfare gains by the generations born after the reform.

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File URL: http://research.economics.unsw.edu.au/RePEc/papers/2009-10.pdf
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Bibliographic Info

Paper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2009-10.

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Length: 30 pages
Date of creation: Jun 2009
Date of revision:
Handle: RePEc:swe:wpaper:2009-10

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Keywords: Social Security Reform; Generous Public Sector Pensions; Capital Accumulation; Public Education and Infrastructure Investments;

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References

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  1. Fernandez, Raquel & Rogerson, Richard, 1996. "Income Distribution, Communities, and the Quality of Public Education," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 111(1), pages 135-64, February.
  2. Barro, R.J., 1988. "Government Spending In A Simple Model Of Endogenous Growth," RCER Working Papers 130, University of Rochester - Center for Economic Research (RCER).
  3. Ugo Panizza, 2000. "The Public Sector Premium and the Gender Gap in Latin America: Evidence from the 1980s and 1990s," Research Department Publications 4229, Inter-American Development Bank, Research Department.
  4. Gerhard Glomm & Juergen Jung & Chung Tran, 2006. "Macroeconomic Implications of Early Retirement in the Public Sector: The Case of Brazil," Caepr Working Papers, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington 2006-008, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  5. Panizza, Ugo & Qiang, Christine Zhen-Wei, 2005. "Public-private wage differential and gender gap in Latin America: Spoiled bureaucrats and exploited women?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 34(6), pages 810-833, December.
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  15. Charles R. Hulten, 1996. "Infrastructure Capital and Economic Growth: How Well You Use It May Be More Important Than How Much You Have," NBER Working Papers 5847, National Bureau of Economic Research, Inc.
  16. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, Econometric Society, vol. 49(4), pages 843-67, June.
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  18. Ferreira, Pedro Cavalcanti Gomes & Nascimento, Leandro Gonçalves do, 2005. "Welfare and Growth Effects of Alternative Fiscal Rules for Infrastructure Investment in Brazil," Economics Working Papers (Ensaios Economicos da EPGE) 604, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
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  20. Pereira, Luiz Carlos Bresser, 1989. "The Perverse Macroeconomics of Debit, Deficit and Inflation in Brazil," Textos para discussão 2, Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Public pensions vs. public investment
    by Economic Logician in Economic Logic on 2009-08-06 14:33:00
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Cited by:
  1. Gerhard Glomm & Juergen Jung, 2013. "A Macroeconomic Analysis of Energy Subsidies in a Small Open Economy," Working Papers 2013-02, Towson University, Department of Economics, revised Feb 2013.
  2. Gerhard Glomm & Juergen Jung, 2010. "A Macroeconomic Analysis of the Fiscal System in Egypt," Working Papers 2010-17, Towson University, Department of Economics, revised Oct 2010.

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