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Latvian pension reform


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  • Fox, Louise
  • Palmer, Edward
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    In 1995, Latvia became the first country in Central and Eastern Europe to implement parametric reform of the Soviet-style PAYGO pension system, and the first in the world to implement the"notional defined contribution (NDC) system"originally designed for Sweden. The Government's intention was to follow the overhaul of the PAYGO system with the creation of a funded second tier by 1998, but the reform has lagged. Public acceptance of the new system has been poor, and pressures for rollback of the reforms have grown. After such a splashy beginning why did the Latvian reform stall? What has been the net effect of the reforms after the roll backs? How did Latvia balance the difficult issues of system incentives, fairness, and affordability? What are the lessons of the Latvian experience with the NDC system for other reforming countries? These questions are the subject of this paper. It includes a description of pre-reform situation, describes the key provisions of the original reform, and discusses the subsequent amendments. The impact of the reform is assessed on the basis of macroeconomic and microeconomic simulations. On the basis of those, the reforms are evaluated and conclusions for other countries are drawn.

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    Bibliographic Info

    Paper provided by The World Bank in its series Social Protection Discussion Papers with number 20850.

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    Date of creation: 31 Aug 1999
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    Handle: RePEc:wbk:hdnspu:20850

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    Keywords: Pensions&Retirement Systems; Banks&Banking Reform; Environmental Economics&Policies; Economic Theory&Research; Gender and Law;


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    Cited by:
    1. Christina Benita Wilke, 2008. "On the feasibility of notional defined contribution systems: The German case," MEA discussion paper series 08165, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    2. Axel Börsch-Supan, 2003. "What are NDC Pension Systems? What Do They Bring to Reform Strategies?," MEA discussion paper series 03042, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    3. Góra, Marek & Palmer, Edward, 2004. "Shifting Perspectives in Pensions," IZA Discussion Papers 1369, Institute for the Study of Labor (IZA).
    4. World Bank, 2004. "Kazakhstan - The New Pensions in Kazakhstan : Challenges in Making the Transition," World Bank Other Operational Studies 14362, The World Bank.


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