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How Progressive is the Czech Pension Security?

Author

Listed:
  • Stanislav Klazar
  • Barbora Slintáková

Abstract

The aim of the paper is to examine the progressivity of the pension security in the Czech Republic using an intragenerational longitudinal approach. Since there is no available Czech panel data we modelled pseudo-panel data on lifetime earnings of employees on the basis of real crosssectional data. Then the present values of lifetime contributions paid to and lifetime pensions received from the system were derived from the simulated lifetime earnings. The analysis revealed that the Czech pension security redistributes the funds from the higher-income participants to the lower-income ones and from men to women. Furthermore the Gini coefficients confirmed that the scheme reduces income inequality. The results proved that the solidarity principle built in the pension formula prevails over the benefit principle, which is also present in the formula, when the benefit component is relatively more favourable for the rich employees because of the shape of the lifetime earnings function.

Suggested Citation

  • Stanislav Klazar & Barbora Slintáková, 2012. "How Progressive is the Czech Pension Security?," Prague Economic Papers, University of Economics, Prague, vol. 2012(3), pages 309-327.
  • Handle: RePEc:prg:jnlpep:v:2012:y:2012:i:3:id:426:p:309-327
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    References listed on IDEAS

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    1. Martin Feldstein & Jeffrey B. Liebman, 2002. "The Distributional Aspects of Social Security and Social Security Reform," NBER Books, National Bureau of Economic Research, Inc, number feld02-1, January.
    2. Berkel, Barbara & Börsch-Supan, Axel, 2004. "Pension reform in Germany : the impact on retirement decisions," Papers 04-62, Sonderforschungsbreich 504.
    3. Martin S. Feldstein & Jeffrey B. Liebman, 2002. "Introduction to "The Distributional Aspects of Social Security and Social Security Reform"," NBER Chapters,in: The Distributional Aspects of Social Security and Social Security Reform, pages 1-10 National Bureau of Economic Research, Inc.
    4. Gilbert E. Metcalf & Don Fullerton, 2002. "The Distribution of Tax Burdens: An Introduction," NBER Working Papers 8978, National Bureau of Economic Research, Inc.
    5. Barbara Berkel & Axel Börsch-Supan, 2004. "Pension Reform in Germany: The Impact on Retirement Decisions," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 60(3), pages 393-393, September.
    6. Jagadeesh Gokhale & Laurence J. Kotlikoff, 2002. "Social Security's Treatment of Postwar Americans. How Bad Can It Get?," NBER Chapters,in: The Distributional Aspects of Social Security and Social Security Reform, pages 207-262 National Bureau of Economic Research, Inc.
    7. Nelissen, Jan H. M., 1998. "Annual versus lifetime income redistribution by social security," Journal of Public Economics, Elsevier, vol. 68(2), pages 223-249, May.
    8. Axel Börsch-Supan & Barbara Berkel, 2004. "Pension Reform in Germany: The Impact on Retirement Decisions," MEA discussion paper series 04062, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
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    Citations

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    Cited by:

    1. Jan Vlachý, 2015. "Measuring the Effective Tax Burden of Lifetime Personal Income," European Financial and Accounting Journal, University of Economics, Prague, vol. 2015(3), pages 5-14.
    2. Jana Tepperová & Stanislav Klazar, 2012. "Vliv sociálních systémů a jejich koordinace na ekonomickou migraci
      [The Impact of Social Systems and their Coordination on Economic Migration]
      ," Politická ekonomie, University of Economics, Prague, vol. 2012(4), pages 505-522.
    3. repec:prg:jnlpol:v:2017:y:2017:i:4:id:1152:p:410-423 is not listed on IDEAS

    More about this item

    Keywords

    social security; progressivity; old age pensions; redistribution; lifetime incidence;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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