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New Models for Old-Age Security: Experiments, Evidence, and Unanswered Questions

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  • James, Estelle

Abstract

The escalating costs of traditional social security systems are forcing countries to reevaluate the formal programs that provide income maintenance support to the aging. This article suggests a reform strategy built around three systems, or "pillars," to provide old-age security-a public pillar with mandatory participation, a private, mandatory savings plan, and a voluntary savings system. Three variations of this model are being implemented in different countries: the Latin American model, in which individual workers choose an investment manager for their retirement funds; the OECD model, in which employers, union trustees, or both choose the investment manager for an entire company or occupation; and the Swedish notional account model, in which there are no funds to invest. Preliminary empirical evidence on the efficiency and growth effects of pension reform, mostly from Chile, indicates that the impact on national saving and financial market development and, through these, economic growth, has been positive and possibly large.

Suggested Citation

  • James, Estelle, 1998. "New Models for Old-Age Security: Experiments, Evidence, and Unanswered Questions," World Bank Research Observer, World Bank Group, vol. 13(2), pages 271-301, August.
  • Handle: RePEc:oup:wbrobs:v:13:y:1998:i:2:p:271-301
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    References listed on IDEAS

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    1. Whitehouse, Edward, 1998. "Pension reform in Britain," Social Protection and Labor Policy and Technical Notes 20053, The World Bank.
    2. repec:idb:wpaper:322 is not listed on IDEAS
    3. Olivia S. Mitchell, 1998. "Administrative Costs in Public and Private Retirement Systems," NBER Chapters,in: Privatizing Social Security, pages 403-456 National Bureau of Economic Research, Inc.
    4. Gramlich, Edward M, 1996. "Different Approaches for Dealing with Social Security," American Economic Review, American Economic Association, vol. 86(2), pages 358-362, May.
    5. Morande, Felipe G., 1998. "Savings in Chile. What went right?," Journal of Development Economics, Elsevier, vol. 57(1), pages 201-228, October.
    6. Haindl Rondanelli, Erik, 1996. "Chilean pension fund reform and its impact on saving," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34299, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    7. Felipe Morandé, 1996. "Savings in Chile: What Went Right?," IDB Publications (Working Papers) 6194, Inter-American Development Bank.
    8. Palacios, Robert & Rocha, Roberto, 1998. "The Hungarian pension system in transition," Social Protection and Labor Policy and Technical Notes 20048, The World Bank.
    9. Fox, Louise & Palmer, Edward, 1999. "Latvian pension reform," Social Protection and Labor Policy and Technical Notes 20850, The World Bank.
    10. Felipe Morandé, 1996. "Savings in Chile: What Went Right?," IDB Publications (Working Papers) 5922, Inter-American Development Bank.
    11. Robert Holzmann, 1997. "Fiscal Alternatives of Moving from Unfunded to Funded Pensions," OECD Development Centre Working Papers 126, OECD Publishing.
    12. A. Javier Hamann, 1997. "The Reform of the Pension System in Italy," IMF Working Papers 97/18, International Monetary Fund.
    13. Friedman, Barry*James, Estelle*Kane, Cheikh*Quei, 1996. "How can China provide income security for its rapidly aging population?," Policy Research Working Paper Series 1674, The World Bank.
    14. Corsetti, Giancarlo & Schmidt-Hebbel, Klaus, 1995. "Pension reform and growth," Policy Research Working Paper Series 1471, The World Bank.
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    Cited by:

    1. Gora, Marek & Rutkowski, Michal, 1998. "The quest for pension reform : Poland's security through diversity," Social Protection and Labor Policy and Technical Notes 20111, The World Bank.
    2. Rabindra Nath Chakraborty, 1999. "Finanzkrise und der Aufbau der Alterssicherung: Das Beispiel Thailand," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 68(1), pages 36-50.
    3. Esteban Calvo, 2014. "Comparative-historical Analysis of Aging Policy Reforms in Argentina, Chile, Costa Rica, and Mexico," Working Papers 61, Facultad de Economía y Empresa, Universidad Diego Portales.
    4. Gupta Ramesh, 2002. "Pension Reforms in India: Myth, Reality and Policy Choices," IIMA Working Papers WP2002-09-03, Indian Institute of Management Ahmedabad, Research and Publication Department.

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