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Pension reform in the Czech Republic: Not a Lost Case?

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Abstract

In this paper, we combine macro and microeconomic approaches to a pension reform. First, we modify an OLG model and estimate macroeconomic effects of a pension systém switch from a pure PAYG to a mixed system. Second, we employ macroeconomic results in a microeconomic simulation in which we estimate individual welfare gains for various income groups in each cohort affected by the pension reform. We propose an unorthodox sequencing of the pension reform in which the pre-retirement generations would enter the reformed system first. This sequencing maintains the Pareto efficiency condition for all age cohorts, but it gives governments more flexibility in the reform process.

Suggested Citation

  • Ondřej Schneider, 2006. "Pension reform in the Czech Republic: Not a Lost Case?," Working Papers IES 2006/02, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jan 2006.
    • Handle: RePEc:fau:wpaper:wp2006_02
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    References listed on IDEAS

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    1. Martin Feldstein & Andrew Samwick, 1998. "The Transition Path in Privatizing Social Security," NBER Chapters, in: Privatizing Social Security, pages 215-264, National Bureau of Economic Research, Inc.
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    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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