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The Impact of Structural Pension Reforms on the Macroeconomic Performance: An Empirical Analysis

  • Angeliki Theophilopoulou

    (Department of Economics, Mathematics & Statistics, Birkbeck)

Whether pension reforms lead to an improvement in macroeconomic performance is a controversial question. Some countries, which have implemented reforms, claim better economic performance while in others a positive result has yet to be seen. This paper explores two aspects of this issue further: Firstly, we provide a comprehensive investigation of the impact of pension reforms on output, capital stock and consumption. Secondly, we attempt to uncover the factors which lead to cross country heterogeneity in the impact of reform. Our results suggest that pension reform led to an improvement in macroeconomic performance. However, there is also evidence to suggest that this improvement was more pronounced in countries with lower public debt, lower age dependency ratio, more developed financial markets and a higher rate of privatisations.

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Paper provided by Birkbeck, Department of Economics, Mathematics & Statistics in its series Birkbeck Working Papers in Economics and Finance with number 0806.

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Date of creation: Sep 2008
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Handle: RePEc:bbk:bbkefp:0806
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  1. Axel Börsch-Supan & Alexander Ludwig & Joachim Winter, 2004. "Aging, Pension Reform, and Capital Flows: A Multi-Country Simulation Model," MEA discussion paper series 04064, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  2. Barrell, Ray & Byrne, Joseph P. & Dury, Karen, 2003. "The implications of diversity in consumption behaviour for the choice of monetary policy rules in Europe," Economic Modelling, Elsevier, vol. 20(2), pages 275-299, March.
  3. Martin Feldstein & Andrew Samwick, 1996. "The Transition Path in Privatizing Social Security," NBER Working Papers 5761, National Bureau of Economic Research, Inc.
  4. Robert Holzmann, 1996. "Pension Reform, Financial Market Development, and Economic Growth: Preliminary Evidence From Chile," IMF Working Papers 96/94, International Monetary Fund.
  5. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
  6. Peter Diamond, 2004. "Social Security," American Economic Review, American Economic Association, vol. 94(1), pages 1-24, March.
  7. Schwarz, Anita M. & Demirguc-Kunt, Asli, 1999. "Taking stock of pension reforms around the world," Social Protection Discussion Papers 20533, The World Bank.
  8. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
  9. Corsetti, Giancarlo & Schmidt-Hebbel, Klaus, 1995. "Pension reform and growth," Policy Research Working Paper Series 1471, The World Bank.
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