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Shifting Perspectives in Pensions

Author

Listed:
  • Góra, Marek

    () (Warsaw School of Economics)

  • Palmer, Edward

    () (Uppsala University)

Abstract

This paper addresses the questions of what is an economically efficient pension system, what are the externalities and what are the risks of the four alternative pension systems: financial defined contribution (FDC), notional or non-financial defined contribution (NDC), financial defined benefit (FDB) and non-financial defined benefit (NDB). A main contribution of the paper is the development of the concept of NDC, itself a new construction in pension economics. An important conclusion is that NDC is neutral in terms of externalities. It manages the risks and eliminates the negative externalities associated with traditional public NDB schemes, and in a manner similar to FDC schemes.

Suggested Citation

  • Góra, Marek & Palmer, Edward, 2004. "Shifting Perspectives in Pensions," IZA Discussion Papers 1369, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp1369
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    File URL: http://ftp.iza.org/dp1369.pdf
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    References listed on IDEAS

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    1. Hassler, John & Lindbeck, Assar, 1997. "Optimal actuarial fairness in pension systems: A note," Economics Letters, Elsevier, vol. 55(2), pages 251-255, August.
    2. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467-467.
    3. Chlon, Agnieszka & Gora, Marek & Rutkowski, Michal, 1999. "Shaping pension reform in Poland : security through diversity," Social Protection and Labor Policy and Technical Notes 20852, The World Bank.
    4. Assar Lindbeck & Mats Persson, 2003. "The Gains from Pension Reform," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 74-112, March.
    5. Daniele Franco, 2002. "Italy: A Never-Ending Pension Reform," NBER Chapters,in: Social Security Pension Reform in Europe, pages 211-262 National Bureau of Economic Research, Inc.
    6. Fox, Louise & Palmer, Edward, 1999. "Latvian pension reform," Social Protection and Labor Policy and Technical Notes 20850, The World Bank.
    7. Robert Holzmann, 1997. "Pension Reform, Financial Market Development, and Economic Growth: Preliminary Evidence from Chile," IMF Staff Papers, Palgrave Macmillan, vol. 44(2), pages 149-178, June.
    8. Edward Palmer, 2002. "Swedish Pension Reform: How Did It Evolve, and What Does It Mean for the Future?," NBER Chapters,in: Social Security Pension Reform in Europe, pages 171-210 National Bureau of Economic Research, Inc.
    9. Valdes-Prieto, Salvador, 2000. " The Financial Stability of Notional Account Pensions," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(3), pages 395-417, June.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Marek Góra, 2014. "Redesigning pension systems," IZA World of Labor, Institute for the Study of Labor (IZA), pages 1-51, May.
    2. Palmer, Edward, 2006. "Public policy for pensions, health and sickness insurance," Documentos de Proyectos 85, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).

    More about this item

    Keywords

    pensions; NDC; FDC; notional account systems; financial account systems; funding; externalities; risks; defined contribution; government debt;

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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