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Reforming Social Security in a Transition Economy: The Case of Lithuania

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  • Svend Jensen
  • Jukka Lassila

Abstract

This paper points out a number of problems associated with the existing pension system in Lithuania. Reforms are proposed, including (i) a substantial increase in the basic pension benefit rate, financed on a pay-as-you-go basis, provided universally, and regulated according to wage/price indexation; (ii) a significant cut in the tax contribution rate to the public pension system matched by a rise in the VAT; (iii) a rise in the retirement age to 65 for both men and women; and (iv) a gradual conversion to a private, funded, mandatory pension system to replace the earnings-related part of the current pension system.

Suggested Citation

  • Svend Jensen & Jukka Lassila, 2002. "Reforming Social Security in a Transition Economy: The Case of Lithuania," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 5(1), pages 17-36.
    • Handle: RePEc:taf:jpolrf:v:5:y:2002:i:1:p:17-36
    DOI: 10.1080/13841280212382
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    References listed on IDEAS

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    1. Prof. Dr. Robert Holzmann, 1994. "Funded and Private Pensions for Eastern European Countries in Transition?," Public Economics 9405004, University Library of Munich, Germany.
    2. Mr. Richard Hemming, 1998. "Should Public Pensions be Funded?," IMF Working Papers 1998/035, International Monetary Fund.
    3. repec:wbk:wbrwps:98252 is not listed on IDEAS
    4. Mr. Carlo Cottarelli & Mr. Luis M. Cubeddu & Mr. M. Cangiano, 1998. "Pension Developments and Reforms in Transition Economies," IMF Working Papers 1998/151, International Monetary Fund.
    5. Palacios,Robert J. & Pallares-Miralles,Montserrat, 2000. "International patterns of pension provision," The Social Policy and Labor Discussion Paper Series 98252, The World Bank.
    6. Georges de Menil, 2000. "A Comment on the Place of Funded Pensions in Transition Economies," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(4), pages 431-444, August.
    7. Hans Fehr & Laurence J. Kotlikoff & Willi Leibfritz, 1999. "Generational Accounting in General Equilibrium," NBER Chapters, in: Generational Accounting around the World, pages 43-72, National Bureau of Economic Research, Inc.
    8. Simon Johnson & Daniel Kaufman & Andrei Shleifer, 1997. "The Unofficial Economy in Transition," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 159-240.
    9. Martin Feldstein, 1997. "Transition to a Fully Funded Pension System: Five Economic Issues," NBER Working Papers 6149, National Bureau of Economic Research, Inc.
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