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Retirement Systems in Developed and Developing Countries: Institutional Features, Economic Effects, and Lessons for Economies in Transition

  • Olivia S. Mitchell

Multiple-pillar retirement systems have widely differing roles for private retirement savings, government regulation and insurance of private savings vehicles, and government provision of old-age income support. Despite their diversity, and despite the fact that public and private sector retirement systems command a great deal of wealth and have potentially powerful effects on labor and capital markets, they are often overlooked in structural analyses of country problems and prospects. This paper examines important institutional features of retirement systems in developed and developing countries, and outlines what is known about their economic effects. Also identified are ways in which public and private retirement systems affect the process of economic adjustment, with special attention to the costs and benefits of encouraging early retirement. The review shows that a coherent reform plan for a retirement system must identify how much old-age income security is affordable, how the government and private sector can address private market failures in providing this security, and how these objectives can be attained given available financing mechanisms. There is evidence that many retirement systems will be forced to change a great deal in the next few decades. In some cases, retirement benefits will have to be reduced (perhaps by imposing a means test), the age for early retirement will have to be raised, multiple-pillar plans must be integrated and streamlined so as to rationalize work incentives, and the incentives and opportunities for private saving will be increased. In any case, using high-cost long-term retirement systems to mitigate short- and medium-term unemployment problems will probably prove costly and inefficient as a solution to problems faced by economies in transition.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4424.

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Date of creation: Aug 1993
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Publication status: published as In Labor Market Policies for Managing the Social Costs of Economic Adjustment, ed. A. Van Adams, E King and Z. Tzannatos. The World Bank. 1994
Handle: RePEc:nbr:nberwo:4424
Note: LS
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  1. Deaton, A. & Paxson, C.h., 1991. "Patterns of aging in Thailand and Cote D'Ivoire," Papers 81, World Bank - Living Standards Measurement.
  2. Zvi Bodie, 1989. "Pensions as Retirement Income Insurance," NBER Working Papers 2917, National Bureau of Economic Research, Inc.
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  4. Hurd, Michael D, 1990. "Research on the Elderly: Economic Status, Retirement, and Consumption and Saving," Journal of Economic Literature, American Economic Association, vol. 28(2), pages 565-637, June.
  5. Kotlikoff, Laurence J, 1979. "Social Security and Equilibrium Capital Intensity," The Quarterly Journal of Economics, MIT Press, vol. 93(2), pages 233-53, May.
  6. Besley, T. & Coate, S. & Loury, G., 1990. "The Economics Of Rotating Savings And Credit Associations," Working papers 556, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
  8. Laurence J. Kotlikoff & Avia Spivak, 1979. "The Family as an Incomplete Annuities Market," NBER Working Papers 0362, National Bureau of Economic Research, Inc.
  9. Atkinson, A.B., 1987. "Income maintenance and social insurance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 13, pages 779-908 Elsevier.
  10. Rebecca A. Luzadis & Olivia S. Mitchell, 1991. "Explaining Pension Dynamics," Journal of Human Resources, University of Wisconsin Press, vol. 26(4), pages 679-703.
  11. Steven G. Allen & Robert L. Clark, 1987. "Pensions and Firm Performance," NBER Working Papers 2266, National Bureau of Economic Research, Inc.
  12. Hamermesh, Daniel S, 1979. "Entitlement Effects, Unemployment Insurance and Employment Decisions," Economic Inquiry, Western Economic Association International, vol. 17(3), pages 317-32, July.
  13. Atkinson, Anthony B & Micklewright, John, 1991. "Unemployment Compensation and Labor Market Transitions: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1679-1727, December.
  14. B. Douglas Bernheim, 1987. "Social Security Benefits: An Empirical Study of Expectations and Realizations," NBER Working Papers 2257, National Bureau of Economic Research, Inc.
  15. Gary S. Fields & Olivia S. Mitchell, 1984. "The Effects of Social Security Reforms on Retirement Ages and RetirementIncomes," NBER Working Papers 1348, National Bureau of Economic Research, Inc.
  16. MARCHAND, Maurice & PESTIEAU, Pierre, . "Public pensions: choices for the future," CORE Discussion Papers RP -938, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  17. Hannan, Timothy H., 1991. "Bank commercial loan markets and the role of market structure: evidence from surveys of commercial lending," Journal of Banking & Finance, Elsevier, vol. 15(1), pages 133-149, February.
  18. Feldstein, Martin S, 1976. "Social Security and Saving: The Extended Life Cycle Theory," American Economic Review, American Economic Association, vol. 66(2), pages 77-86, May.
  19. Olivia S. Mitchell, 1990. "The Effects of Mandating Benefits Packages," NBER Working Papers 3260, National Bureau of Economic Research, Inc.
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