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Reintroducing Intergenerational Equilibrium: Key Concepts behind the New Polish Pension System

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  • Marek G??ra

Abstract

Poland adopted a new pension system in 1999. This new pension system allows Poland to reduce pension expenditure (as a percent of GDP), instead of increasing it ??? as is projected for the majority of other OECD countries. This paper presents the conceptual background of the new system design. The new system???s long-term objective is to ensure intergenerational equilibrium irrespective of the demographic situation. This requires stabilisation of the share of GDP allocated to the entire retired generation. Traditional pension systems aim, instead, at stabilisation of the share of GDP per retiree. The change in demographic structure observed over the past for a couple of decades and this historic attempt to stabilise the share of GDP per retiree led to severe fiscal problems and negative externalities for growth, as observed in numerous countries. Many countries have tried to reform their pension systems in different ways to try to resolve the issue of these ever-increasing costs. Although the Polish reform uses a number of techniques applied elsewhere, its design differs from the typical approaches ??? and the lessons and results are promising for all OECD countries. This paper presents the theoretical and practical application of this alternative approach and as such, the key features of the new Polish pension system design.

Suggested Citation

  • Marek G??ra, 2003. "Reintroducing Intergenerational Equilibrium: Key Concepts behind the New Polish Pension System," William Davidson Institute Working Papers Series 2003-574, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2003-574
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    References listed on IDEAS

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    1. Gora, Marek & Rutkowski, Michal, 1998. "The quest for pension reform : Poland's security through diversity," Social Protection Discussion Papers and Notes 20111, The World Bank.
    2. Robert Holzmann & Mitchell Orenstein & Michal Rutkowski, 2003. "Pension Reform in Europe : Process and Progress," World Bank Publications, The World Bank, number 15132, July.
    3. Chlon, Agnieszka & Gora, Marek & Rutkowski, Michal, 1999. "Shaping pension reform in Poland : security through diversity," Social Protection Discussion Papers and Notes 20852, The World Bank.
    4. Thai-Thanh Dang & Pablo Antolín & Howard Oxley, 2001. "Fiscal Implications of Ageing: Projections of Age-Related Spending," OECD Economics Department Working Papers 305, OECD Publishing.
    5. 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.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    pensions; equilibrium; GDP; pension debt servicing; income allocation; generations;
    All these keywords.

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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