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How Progressive is the Czech Pension Security?

  • Stanislav Klazar
  • Barbora Slintáková

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.

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Article provided by University of Economics, Prague in its journal Prague Economic Papers.

Volume (Year): 2012 (2012)
Issue (Month): 3 ()
Pages: 309-327

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Handle: RePEc:prg:jnlpep:v:2012:y:2012:i:3:id:426:p:309-327
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  1. Jagadeesh Gokhale & Laurence J. Kotlikoff, 1999. "Social Security's Treatment of Postwar Americans: How Bad Can It Get?," NBER Working Papers 7362, National Bureau of Economic Research, Inc.
  2. Gilbert E. Metcalf & Don Fullerton, 2002. "The Distribution of Tax Burdens: An Introduction," NBER Working Papers 8978, National Bureau of Economic Research, Inc.
  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. 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.
  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-, September.
  6. 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.
  7. 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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