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Partial privatization of a pension system: lessons from Hungary


  • András Simonovits

    (Institute of Economics, Hungarian Academy of Sciences, Budapest, Budaörsi, Hungary)


On 1 January 1998 a three-pillar pension system was introduced in Hungary. It will replace about a ¼ of the existing unfunded public system by a funded private system from 2013. The transition to this 'mixed system' is obligatory for those entering the labour market after 30 June 1998 and optional for the current labour force. Meanwhile the public pillar is also being reformed. This article assesses and evaluates these important developments. Contrary to expectations, the current government has made important changes to the on-going reform programme. These changes threaten to make benefit entitlements under the mixed system less attractive than envisaged. Despite significant funding problems within the unreformed public system, the partial privatization of the public system may cause more problems than it solves. Copyright © 2000 John Wiley & Sons, Ltd.

Suggested Citation

  • András Simonovits, 2000. "Partial privatization of a pension system: lessons from Hungary," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(4), pages 519-529.
  • Handle: RePEc:wly:jintdv:v:12:y:2000:i:4:p:519-529
    DOI: 10.1002/1099-1328(200005)12:4<519::AID-JID688>3.0.CO;2-0

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    References listed on IDEAS

    1. Feldstein, Martin, 1996. "The Missing Piece in Policy Analysis: Social Security Reform," American Economic Review, American Economic Association, vol. 86(2), pages 1-14, May.
    2. Kornai, Janos, 1997. "The Reform of the Welfare State and Public Opinion," American Economic Review, American Economic Association, vol. 87(2), pages 339-343, May.
    3. Andras Simonovits, 1999. "The New Hungarian Pension System and its Problems," IEHAS Discussion Papers 9901, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
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    Cited by:

    1. Roger Charlton & Roddy McKinnon, 2000. "Beyond mandatory privatization: pensions policy options for developing countries," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(4), pages 483-494.
    2. Soòa KILIÁNOVÁ & Igor MELICHERÈÍK & Daniel ŠEVÈOVIÈ, 2006. "A Dynamic Accumulation Model for the Second Pillar of the Slovak Pension System," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 56(11-12), pages 506-521, November.
    3. Andras Simonovits, 2009. "Hungarian Pension System and its Reform," IEHAS Discussion Papers 0908, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    4. Gál, Róbert I. & Simonovits, András & Tarcali, Géza, 2001. "Generational accounting and Hungarian pension reform," Social Protection and Labor Policy and Technical Notes 90343, The World Bank.

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