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Policy Risk in Action: Pension Reforms and Social Security Wealth in Hungary, Czech Republic, and Slovakia

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Abstract

We provide evidence on the policy risk of social security in Hungary, Czech Republic and Slovakia by computing the changes in the social security wealth induced by the pension reforms undertaken since the 1990s. Methodologically we follow upon McHale’s (2001) study of selected reforms in G7 countries. However, as we measure the differential impact of the reform on workers of different genders, ages, and levels of education, we are able to capture the aggregate, intergenerational, and intragenerational aspects of the policy risk. Overall, the paper documents that also a pay-as-you-go system is not a secure source of retirement income since pension reforms do change the future contributions and benefits in different directions for different workers, and the magnitude of the reductions in social security wealth sometimes exceeds several years’ worth of the workers’ earnings.

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  • Libor Dušek & Juraj Kopecsni, 2008. "Policy Risk in Action: Pension Reforms and Social Security Wealth in Hungary, Czech Republic, and Slovakia," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 58(07-08), pages 329-357, Oktober.
    • Handle: RePEc:fau:fauart:v:58:y:2008:i:7-8:p:329-357
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    References listed on IDEAS

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    1. John McHale, 2001. "The Risk of Social Security Benefit-Rule Changes: Some International Evidence," NBER Chapters, in: Risk Aspects of Investment-Based Social Security Reform, pages 247-290, National Bureau of Economic Research, Inc.
    2. John Y. Campbell & Martin Feldstein, 2001. "Introduction to "Risk Aspects of Investment-Based Social Security Reform"," NBER Chapters, in: Risk Aspects of Investment-Based Social Security Reform, pages 1-10, National Bureau of Economic Research, Inc.
    3. Assar Lindbeck & Mats Persson, 2003. "The Gains from Pension Reform," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 74-112, March.
    4. James M. Poterba & Joshua Rauh & Steven F. Venti, 2005. "Utility Evaluation of Risk in Retirement Saving Accounts," NBER Chapters, in: Analyses in the Economics of Aging, pages 13-58, National Bureau of Economic Research, Inc.
    5. David A. Wise, 2005. "Analyses in the Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise05-1.
    6. Martin Feldstein & Horst Siebert, 2002. "Social Security Pension Reform in Europe," NBER Books, National Bureau of Economic Research, Inc, number feld02-2.
    7. Martin Feldstein & Elena Ranguelova & Andrew Samwick, 2001. "The Transition to Investment-Based Social Security When Portfolio Returns and Capital Profitability Are Uncertain," NBER Chapters, in: Risk Aspects of Investment-Based Social Security Reform, pages 41-90, National Bureau of Economic Research, Inc.
    8. John Y. Campbell & Martin Feldstein, 2001. "Risk Aspects of Investment-Based Social Security Reform," NBER Books, National Bureau of Economic Research, Inc, number camp01-1.
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    Cited by:

    1. Robert Jahoda & Jiøí Špalek, 2009. "Pension Reform through Voluntary Opt-Out: The Czech Case," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(4), pages 309-333, Oktober.
    2. David Kocourek & Filip Pertold, 2011. "The Impact of Early Retirement Incentives on Labor Market Participation: Evidence from a Parametric Change in the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 61(5), pages 467-483, November.
    3. Grech, Aaron George, 2010. "Assessing the sustainability of pension reforms in Europe," MPRA Paper 27407, University Library of Munich, Germany.
    4. Grech, Aaron George, 2012. "Evaluating the possible impact of pension reforms on future living standards in Europe," LSE Research Online Documents on Economics 51296, London School of Economics and Political Science, LSE Library.
    5. Grech, Aaron George, 2014. "Evaluating the possible impact of pension reforms on elderly poverty in Europe," MPRA Paper 57639, University Library of Munich, Germany.
    6. Ondøej Schneider, 2009. "Reforming Pensions in Europe: Economic Fundamentals and Political Factors," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(4), pages 292-308, Oktober.
    7. repec:cep:sticas:/161 is not listed on IDEAS

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    More about this item

    Keywords

    social security; policy risk; pension reforms;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • P35 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Public Finance

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