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Reforming old-age pensions systems in Central and Eastern European countries in transition

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  • Robert Holzmann

Abstract

This paper investigates the need and the options for reforming the inherited public pension schemes in Central and Eastern European countries moving from a centrally planned to a market-oriented economic structure. Pension expenditure as a percentage of GDP in the former centrally planned economies are still somewhat below the (unweighted) average experienced in the OECD area. Nevertheless, the burden on the economy in the reform countries is considerable and going to rise starkly unless major reforms are undertaken. In addition, the current pension systems exhibit various deficiencies at microeconomic level (in the area of the benefit formula, retirement age, indexation procedures, financing and taxation) which need to be corrected in order to reduce distortions on individual labor supply and saving decisions. The pension models in mind by the reformers in economies in transition (ETs) range from basic public pensions (on a universal or means tested basis), to a two tier public system (consisting of a basic flat rate plus a limited earnings related pension scheme), to an earnings related public scheme targeted toward the lower and middle income levels. In all cases any additional income requirement for old-age would be covered by private provisions (on mandatory, collective or voluntary basis) under appropriate public regulations. This paper provides a preliminary assessment of three main options for going private, namely (i) the social security debt — government asset swap; (ii) the conversion option (Chilean approach); and the tax induced phasing in-phasing out option. The paper concludes that private and funded options may play some role in the solution of the public pension problem, but the scope still remains uncertain. Copyright Springer-Verlag 1993
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Suggested Citation

  • Robert Holzmann, 1993. "Reforming old-age pensions systems in Central and Eastern European countries in transition," Journal of Economics, Springer, vol. 7(1), pages 191-218, December.
  • Handle: RePEc:kap:jeczfn:v:7:y:1993:i:1:p:191-218 DOI: 10.1007/BF03052298
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    References listed on IDEAS

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    1. Eduardo Borensztein, 1991. "Proposals for Privatization in Eastern Europe," IMF Working Papers 91/36, International Monetary Fund.
    2. Lans Bovenberg & Carel Petersen, 1992. "Public debt and pension policy," Fiscal Studies, Institute for Fiscal Studies, pages 1-14.
    3. George Kopits, 1991. "Fiscal Reform in European Economies in Transition," IMF Working Papers 91/43, International Monetary Fund.
    4. Eduardo Borensztein & Manmohan S. Kumar, 1991. "Proposals for Privatization in Eastern Europe," IMF Staff Papers, Palgrave Macmillan, vol. 38(2), pages 300-326, June.
    5. Holzmann, Robert, 1992. "Tax Reform in Countries in Transition: Central Policy Issues," Public Finance = Finances publiques, , vol. 47(Supplemen), pages 233-255.
    6. Bovenberg, A.L. & Petersen, C., 1992. "Public debt and pension policy," Other publications TiSEM a1c7c616-a820-457e-937b-8, Tilburg University, School of Economics and Management.
    7. Peter J Montiel & Eduardo Borensztein, 1991. "Savings, Investment, and Growth in Eastern Europe," IMF Working Papers 91/61, International Monetary Fund.
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    Cited by:

    1. Prof. Dr. Robert Holzmann, 1994. "Funded and Private Pensions for Eastern European Countries in Transition?," Public Economics 9405004, EconWPA.
    2. Henrik Petersen, Jorn, 1998. "Recent research on public pension systems. A review," Labour Economics, Elsevier, vol. 5(1), pages 91-108, March.

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