Public Sector Pension Policies and Capital Accumulation in an Emerging Economy: The Case of Brazil
In many emerging economies such as Brazil, pension programs of public sector workers are more generous than pension programs of private sector workers. 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 this paper, we develop a two-sector dynamic general equilibrium framework to quantify these opportunity cost effects. We find that the efficiency and welfare gains of reallocating government resources from non-productive public sector pensions to productive public education and infrastructure investments are larger than the welfare effects created by classic public pension reforms that simply reduce savings and tax distortions by making pensions less generous. 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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Volume (Year): 10 (2010)
Issue (Month): 1 (June)
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References listed on IDEAS
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- David Card & Alan Krueger, 1990.
"Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States,"
NBER Working Papers
3358, National Bureau of Economic Research, Inc.
- Card, David & Krueger, Alan B, 1992. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 1-40, February.
- Ferreira, Pedro Cavalcanti & 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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