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Public Sector Pension Policies and Capital Accumulation in Emerging Economies

Author

Listed:
  • 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.

Suggested Citation

  • Gerhard Glomm & Juergen Jung & Changmin Lee & Chung Tran, 2009. "Public Sector Pension Policies and Capital Accumulation in Emerging Economies," Discussion Papers 2009-10, School of Economics, The University of New South Wales.
  • Handle: RePEc:swe:wpaper:2009-10
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    File URL: http://research.economics.unsw.edu.au/RePEc/papers/2009-10.pdf
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    References listed on IDEAS

    as
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    1. Public pensions vs. public investment
      by Economic Logician in Economic Logic on 2009-08-06 19:33:00

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    More about this item

    Keywords

    Social Security Reform; Generous Public Sector Pensions; Capital Accumulation; Public Education and Infrastructure Investments;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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