A Comment on the Place of Funded Pensions in Transition Economies
Arguments are presented in the case of Eastern European transitioncountries for combining the restructuring of insolvent pay-as-you-goretirement systems with the introduction of mandatory, private,funded pensions. They involve the reduction of dead-weight loss,the return to formal activity of gray markets, and the developmentof capital markets. With the proper financing, such policiescan also increase national savings. Lack of public knowledgeabout financial instruments for saving argues for making participationin the private funds mandatory. A combination of a reformed pay-as-you-gosystem with private, mandatory funds balances concern for politicalrisk and real wage variability with concern for the variabilityof real financial returns. Animportant caveat is in order. Implementing such a policy requiresa capacity for effective enforcement of prudencial regulationsand a commitment to macroeconomic stability. If these are notpresent, reform should be limited to restoring balance to thepay-as-you-go system. Copyright Kluwer Academic Publishers 2000
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Volume (Year): 7 (2000)
Issue (Month): 4 (August)
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- Georges de Menil & Eytan Sheshinski, 2002. "Romania's Pension System: From Crisis to Reform," NBER Chapters,in: Social Security Pension Reform in Europe, pages 401-438 National Bureau of Economic Research, Inc.
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- A. B. Atkinson, 1999. "The Economic Consequences of Rolling Back the Welfare State," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011719, July.
- Peter A. Diamond, 1997. "Macroeconomics Aspects of Social Security Reform," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 1-88.
- Peter A. Diamond (ed.), 1999. "Issues in Privatizing Social Security: Report of an Expert Panel of the National Academy of Social Insurance," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262041774, July. Full references (including those not matched with items on IDEAS)
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