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Does Pension Privatization Increase Economic Growth? Evidence from Latin America and Eastern Europe

Author

Listed:
  • Nikola Altiparmakov
  • Milan Nedeljkovic

Abstract

Analyses of pension funding effects on economic growth need to differentiate between ‘carve-out’ pension privatization in Latin America and Eastern Europe and typical ‘add-on’ pension funding in Western Europe and North America. We find no evidence that pension privatization in Latin America and Eastern Europe was associated with higher economic growth. The result is robust across both continents and several alternative econometric specifications. Positive growth effects are particularly unlikely in countries resorting to debt-financed privatization. Furthermore, we note the lack of positive pension privatization effects on savings in Eastern Europe, with limited evidence of positive savings effects in Latin America. These findings suggest that cost-containment parametric reforms should be given priority over carve-out pension privatization when considering options for restoring financial sustainability of public Pay-As-You-Go systems.

Suggested Citation

  • Nikola Altiparmakov & Milan Nedeljkovic, 2016. "Does Pension Privatization Increase Economic Growth? Evidence from Latin America and Eastern Europe," CESifo Working Paper Series 6074, CESifo.
    • Handle: RePEc:ces:ceswps:_6074
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp6074.pdf
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    Cited by:

    1. Predrag Bejakovic & Zeljko Mrnjavac, 2020. "Fully Funded Pension System In Six Non Eu Balkan Countries," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 29(1), pages 101-121, june.

    More about this item

    Keywords

    pension funding; economic growth; national saving; emerging economies;
    All these keywords.

    JEL classification:

    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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