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Pension Reform in a Highly Informalized Post-Soviet Economy

Author

Listed:
  • Anton Dobronogov

    (Kennedy School of Government, Harvard University)

  • Les Mayhew

    (Birkbeck College, University of London)

Abstract

Pension reform is now on the national agenda in most post-Soviet countries. These countries have highly informalized economies, which means that large areas of economic activity go unreported to the authorities. This paper deals with the problem of pension reform in a highly informalized post-Soviet economy, Ukraine. It includes an analysis of causes and consequences of informalization, a general description and analysis of trends in the Ukrainian pension system, and a discussion of different approaches to reform. The paper describes an approach to modeling labor and capital flows between the formal and informal sectors using a gravity model. It also reports and discusses results of simulations of different scenarios of pension reform in Ukraine. Policy-relevant findings of the study are as follows: • Public trust in reform is crucial. Therefore, in designing and implementing reforms exceptional attention should be paid to trust-building measures; • Debt-financed transition to a fully-funded pension system in an informalized post-Soviet economy can lead to higher efficiency gains than a tax-financed transition. This is due to an alleviation of the tax burden, which encourages a decline in unreported economic activity. • Provided that public trust in the reform is sufficient, the larger the fully-funded system, the greater will be the decline in informalization.

Suggested Citation

  • Anton Dobronogov & Les Mayhew, 2000. "Pension Reform in a Highly Informalized Post-Soviet Economy," Public Economics 0004008, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwppe:0004008
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    References listed on IDEAS

    as
    1. A.V. Dobronogov, 1998. "Systems Analysis of Social Security in a Transition Economy: The Ukrainian Case," Working Papers ir98073, International Institute for Applied Systems Analysis.
    2. Peter Luzik, 1999. "International Experience in Tax Reform and Lessons for Ukraine," CERT Discussion Papers 9904, Centre for Economic Reform and Transformation, Heriot Watt University.
    3. Kaufmann, Daniel & Kaliberda, Aleksander, 1996. "Integrating the unofficial economy into the dynamics of post-socialist economies : a framework of analysis and evidence," Policy Research Working Paper Series 1691, The World Bank.
    4. Robert H. Bates & Steven A. Block & Ghada Fayad & Anke Hoeffler, 2013. "The New Institutionalism and Africa," Journal of African Economies, Centre for the Study of African Economies, vol. 22(4), pages 499-522, August.
    5. F.L. MacKellar & T.Y. Ermolieva, 1999. "The IIASA Social Security Reform Project Multiregional Economic-Demographic Growth Model: Policy Background and Algebraic Structure," Working Papers ir99007, International Institute for Applied Systems Analysis.
    6. Loayza, Norman V., 1996. "The economics of the informal sector: a simple model and some empirical evidence from Latin America," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 45(1), pages 129-162, December.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Israel Marques, 2014. "Firms And Social Policy In The Post-Communist Bloc: Evidence From Russia," HSE Working papers WP BRP 87/EC/2014, National Research University Higher School of Economics.
    2. Henryk Gurgul & Paweł Majdosz, 2006. "The impact of institutional investors on risk and stock return autocorrelations in the context of the Polish pension reform," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 16(2), pages 5-30.
    3. repec:zbw:bofitp:2018_007 is not listed on IDEAS
    4. Marques II, Israel, 2018. "Firms and social policy preferences under weak institutions: Evidence from Russia," BOFIT Discussion Papers 7/2018, Bank of Finland Institute for Emerging Economies (BOFIT).
    5. Marques II, Israel, 2018. "Firms and social policy preferences under weak institutions : Evidence from Russia," BOFIT Discussion Papers 7/2018, Bank of Finland, Institute for Economies in Transition.

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    More about this item

    Keywords

    pension reform; informal economy; transition; post-Soviet economy; Ukraine;
    All these keywords.

    JEL classification:

    • E - Macroeconomics and Monetary Economics

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