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Unprivatizing the Pension System: The Case of Poland

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  • Jan Hagemejer

    ()
    (National Bank of Poland; Faculty of Economic Sciences, University of Warsaw)

  • Krzysztof Makarski

    ()
    (National Bank of Poland; Warsaw School of Economics)

  • Joanna Tyrowicz

    ()
    (Faculty of Economic Sciences, University of Warsaw; National Bank of Poland)

Abstract

In many countries the fiscal tension associated with the global financial crisis brings about the discussion about unprivatizing the social security system. This paper employs an OLG model to assess ex ante the effects of such changes to the pension reform in Poland from 1999 as implemented in 2011 and proposed in 2013. We simulate the behavior of the economy without the implemented/proposed changes and compare it to a status quo defined by the reform from 1999. We find that the changes implemented in 2011 and all of the proposed reform scenarios from 2013 are detrimental to welfare. The effects on capital and output are small and depend on the selected fiscal closure. Implied effective replacement rates are lower. These findings are robust to time inconsistency. The shortsightedness of the governments imposes welfare costs.

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File URL: http://www.wne.uw.edu.pl/inf/wyd/WP/WNE_WP111.pdf
File Function: First version, 2013
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Bibliographic Info

Paper provided by Faculty of Economic Sciences, University of Warsaw in its series Working Papers with number 2013-26.

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Length: 19 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:war:wpaper:2013-26

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Keywords: OLG; PAYG; pension system reform; time inconsistency;

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  1. Chlon, Agnieszka & Gora, Marek & Rutkowski, Michal, 1999. "Shaping pension reform in Poland : security through diversity," Social Protection Discussion Papers 20852, The World Bank.
  2. Weiss M. & Börsch-Supan A., 2013. "Productivity and age: Evidence from work teams at the assembly line," ROA Research Memorandum 009, Maastricht University, Research Centre for Education and the Labour Market (ROA).
  3. Jan Hagemejer & Krzysztof Makarski & Joanna Tyrowicz, 2013. "Efficiency of the pension reform: the welfare effects of various fiscal closures," Working Papers 2013-23, Faculty of Economic Sciences, University of Warsaw.
  4. Shinichi Nishiyama & Kent Smetters, 2005. "Does Social Security Privatization Produce Efficiency Gains?," NBER Working Papers 11622, National Bureau of Economic Research, Inc.
  5. Ayse Imrohoroglu & Selahattin Imrohoroglu & Douglas H. Joines, 2000. "Time inconsistent preferences and Social Security," Discussion Paper / Institute for Empirical Macroeconomics 136, Federal Reserve Bank of Minneapolis.
  6. Margherita Borella & Flavia Coda Moscarola, 2009. "Microsimulation of Pension Reforms: Behavioural versus Nonbehavioural Approach," CeRP Working Papers 86, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  7. Marek Góra, 2013. "Political economy of pension reforms: selected general issues and the Polish pension reform case," IZA Journal of Labor & Development, Springer, vol. 2(1), pages 1-31, December.
  8. Blake, David, 2000. "Does It Matter What Type of Pension Scheme You Have?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 110(461), pages F46-81, February.
  9. Hans Fehr, 2009. "Computable Stochastic Equilibrium Models and Their Use in Pension- and Ageing Research," De Economist, Springer, vol. 157(4), pages 359-416, December.
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