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A Comment on the Place of Funded Pensions in Transition Economies

Author

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  • de Menil, G.

Abstract

Arguments are presented in the case of Eastern European transition countries for combining the restructuring of insolvent pay-as-you-go retirement systems with the introduction of mandatory, private, funded pensions. They involve the reduction of dead-weight loss, the return to formal activity of gray markets, and the development of capital markets. With the proper financing, such policies can also increase national savings. Lack of public knowledge about financial instruments for saving argues for making participation in the private funds mandatory. A combination of a reformed pay-as-you-go system with private, mandatory funds balances concern for political risk and real wage variability with concern for the variability of real financial returns. An important caveat is in order. Implementing such a policy requires a capacity for effective enforcement of prudencial regulations and a commitment to macroeconomic stability. If these are not present, reform should be limited to restoring balance to the pay-as-you-go system.

Suggested Citation

  • de Menil, G., 2000. "A Comment on the Place of Funded Pensions in Transition Economies," DELTA Working Papers 2000-04, DELTA (Ecole normale supérieure).
    • Handle: RePEc:del:abcdef:2000-04
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    Cited by:

    1. is not listed on IDEAS
    2. 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.
    3. Viorel Craciuneanu & Daniel Stefan, 2015. "Budget Level of Social Security Pension in Romania Compared to Social Aid Established by the Legislator," Knowledge Horizons - Economics, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 7(1), pages 116-121, March.
    4. Georges de Menil & Eytan Sheshinski, 2002. "Romania's Pension System: From Crisis to Reform," NBER Chapters, in: Social Security Pension Reform in Europe, pages 401-438, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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