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Economies of Scale and Pension Fund Plans: Evidence from South Africa

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Listed:
  • Albert Touna Mama
  • Neryvia Pillay
  • Johannes W. Fedderke

Abstract

The focus of this paper is on the presence of economies of scale in administering pension funds. We make use of a unique dataset with extensive information on South African retirement funds from 1996 to 2006. For almost fifty years now, South Africa has operated under a system with small social security beneÂ…ts but with considerable options and freedom to long-term savers. The dataset contains aggregate information for various fund types, fund classes, as well as different benefit structures. Estimates of a translog cost function provide evidence of unused economies of scale in the industry. We also find that established funds have a substantial cost-advantage over young funds.

Suggested Citation

  • Albert Touna Mama & Neryvia Pillay & Johannes W. Fedderke, 2011. "Economies of Scale and Pension Fund Plans: Evidence from South Africa," Working Papers 214, Economic Research Southern Africa.
  • Handle: RePEc:rza:wpaper:214
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    File URL: http://www.econrsa.org/node/237
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    Keywords

    Economies of scale; DeÂ…ned contribution; Pay as you go; Learning-by-doing; Annuitization;

    JEL classification:

    • 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
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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