IDEAS home Printed from https://ideas.repec.org/p/prt/dpaper/3_2006.html
   My bibliography  Save this paper

The Impact of Privatisation of Pension System on National Saving: The Case of Australia and Iceland

Author

Listed:
  • Mariangela Bonasia
  • Oreste Napolitano

Abstract

Across industrialised and developing countries public pension systems have been heavily reformed during the last two decades. The major concern relates the sustainability of pay-as-you-go (PAYG) pension schemes. To solve public pension system crisis many proposals were issued to privatize social security (completely or partially) shifting towards scaling down the current PAYG system. This study assesses the validity of the effect of pension reforms on domestic savings in two steps: first, using an ARDL model of Pesaran, Shin and Smith (1996) capable of testing for the existence of a long-run relationship regardless of whether the underlying time series are individually integrated of different orders; second, employing the Kalman filter algorithm, in order to recover the parameter dynamics overtime. We select Australia and Iceland because they have complete mandatory private pillar. The empirical evidence derived from the ARDL approach for Australia and Iceland does support the widely held view that growing mandatory pension funds financial assets has significantly positive impact on national saving. Moreover, using the Kalman filter methodology we show that the pattern of the pension funds’ coefficients seemed to capture well the economic dynamic of the period. The coefficients of pension plans illustrate a shift upward soon after the launch of the reforms in 1993 and in 1998 in Australia and Iceland respectively. Both coefficients show a stable trend after the reforms.

Suggested Citation

  • Mariangela Bonasia & Oreste Napolitano, 2006. "The Impact of Privatisation of Pension System on National Saving: The Case of Australia and Iceland," Discussion Papers 3_2006, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
  • Handle: RePEc:prt:dpaper:3_2006
    as

    Download full text from publisher

    File URL: http://economia.uniparthenope.it/ise/sito/DP/DP_3_2006.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Martin Feldstein, 1995. "Social Security and Saving: New Time Series Evidence," NBER Working Papers 5054, National Bureau of Economic Research, Inc.
    2. Keller, Wolfgang, 1998. "Are international R&D spillovers trade-related?: Analyzing spillovers among randomly matched trade partners," European Economic Review, Elsevier, vol. 42(8), pages 1469-1481, September.
    3. Hazel Bateman & John Piggott, 1997. "Private Pensions in OECD Countries: Australia," OECD Labour Market and Social Policy Occasional Papers 23, OECD Publishing.
    4. Lopez Murphy, Pablo & Musalem, Alberto R., 2004. "Pension funds and national saving," Policy Research Working Paper Series 3410, The World Bank.
    5. Kotlikoff, Laurence J & Smetters, Kent A & Walliser, Jan, 1998. "Social Security: Privatization and Progressivity," American Economic Review, American Economic Association, vol. 88(2), pages 137-141, May.
    6. M. Bahmani-Oskooee & S. Chomsisengphet, 2002. "Stability of M2 money demand function in industrial countries," Applied Economics, Taylor & Francis Journals, vol. 34(16), pages 2075-2083.
    7. Colin McKenzie, 1997. "Unit Roots and Cointegration Analysis: The Impact on Empirical Analysis in Economics," The Japanese Economic Review, Japanese Economic Association, vol. 48(1), pages 18-28, January.
    8. Kotlikoff, Laurence, 1996. "Privatizing School Security at Home and Abroad," American Economic Review, American Economic Association, vol. 86(2), pages 368-372, May.
    9. Granger, Clive W J, 1986. "Developments in the Study of Cointegrated Economic Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 213-228, August.
    10. Munnell, Alicia H, 1976. "Private Pensions and Saving: New Evidence," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 1013-1032, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. James Obben & Monique Waayer, 2011. "New Zealand's old-age pension scheme and household saving," International Journal of Social Economics, Emerald Group Publishing, vol. 38(9), pages 767-788, August.

    More about this item

    Keywords

    National saving; pension funds; mandatory; ARDL model; Kalman filter.;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:prt:dpaper:3_2006. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Antonietta Milano). General contact details of provider: http://edirc.repec.org/data/isnavit.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.