Poland adopted a new pension system in 1999. This new pension system allows Poland to reduce pension expenditure (as a percent of GDP), instead of increasing it – as is projected for the majority of other OECD countries. This paper presents the conceptual background of the new system design. The new system’s long-term objective is to ensure intergenerational equilibrium irrespective of the demographic situation. This requires stabilisation of the share of GDP allocated to the entire retired generation. Traditional pension systems aim, instead, at stabilisation of the share of GDP per retiree. The change in demographic structure observed over the past for a couple of decades and this historic attempt to stabilise the share of GDP per retiree led to severe fiscal problems and negative externalities for growth, as observed in numerous countries. Many countries have tried to reform their pension systems in different ways to try to resolve the issue of these ever-increasing costs. Although the Polish reform uses a number of techniques applied elsewhere, its design differs from the typical approaches – and the lessons and results are promising for all OECD countries. This paper presents the theoretical and practical application of this alternative approach and as such, the key features of the new Polish pension system design.
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Length: 29 pages Date of creation: 15 Jun 2003 Date of revision: Handle: RePEc:wdi:papers:2003-574
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Find related papers by JEL classification: D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management
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