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Analyzing The Efficiency Of Pension Reform: The Role Of The Welfare Effects Of Fiscal Closures

Author

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  • Makarski, Krzysztof
  • Hagemejer, Jan
  • Tyrowicz, Joanna
Abstract
Replacing the pay-as-you-go defined benefit (PAYG DB) system with an at least partially funded defined contribution (DC) system generates fiscal costs that need financing. The fiscal closures at hand differ by the channel and the extent of distortions. The main contribution of this paper is a thorough comparison of the welfare effects of the various fiscal closures of the pension system reform. In addition, we decompose the welfare effects to the parts attributable to changing the way pensions are financed (PAYG ⇒ prefunding) and to changing the way pensions are computed (DB ⇒ DC). We show that depending on the fiscal closure, the welfare effects differ substantially for the same pension system reform. The financing of the the pension system gap with public debt allows more intergenerational redistribution.

Suggested Citation

  • Makarski, Krzysztof & Hagemejer, Jan & Tyrowicz, Joanna, 2017. "Analyzing The Efficiency Of Pension Reform: The Role Of The Welfare Effects Of Fiscal Closures," Macroeconomic Dynamics, Cambridge University Press, vol. 21(5), pages 1205-1234, July.
    • Handle: RePEc:cup:macdyn:v:21:y:2017:i:05:p:1205-1234_00
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    Citations

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    Cited by:

    1. Aleksandra Kolasa, 2017. "Macroeconomic consequences of the demographic and educational transition in Poland," Working Papers 2017-30, Faculty of Economic Sciences, University of Warsaw.
    2. Lin, Hsuan-Chih & Tanaka, Atsuko & Wu, Po-Shyan, 2021. "Shifting from pay-as-you-go to individual retirement accounts: A path to a sustainable pension system," Journal of Macroeconomics, Elsevier, vol. 69(C).
    3. Oliwia Komada, 2015. "Children as a public good in PAYG pension system," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 43.
    4. Aleksandra Kolasa, 2022. "The long-term impact of quasi-universal transfers to older households," Working Papers 2022-28, Faculty of Economic Sciences, University of Warsaw.
    5. Beetsma, Roel & Komada, Oliwia & Makarski, Krzysztof & Tyrowicz, Joanna, 2021. "The political (in)stability of funded social security," Journal of Economic Dynamics and Control, Elsevier, vol. 133(C).
    6. Filip Chybalski, 2018. "Intergenerational fairness from an economic perspective: Overview of some theoretical and methodological issues," Business and Economic Horizons (BEH), Prague Development Center, vol. 14(2), pages 268-281, April.
    7. Artur Rutkowski, 2019. "Evaluating an old-age voluntary saving scheme under incomplete rationality," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 55-94.
    8. Moiseyev, K., 2024. "Modeling the transition from pay-as-you-go to a fully funded pension system in Russia," Journal of the New Economic Association, New Economic Association, vol. 64(3), pages 30-52.
    9. Xie, Xiaohong & Osińska, Magdalena & Szczepaniak, Małgorzata, 2023. "Do young generations save for retirement? Ensuring financial security of Gen Z and Gen Y," Journal of Policy Modeling, Elsevier, vol. 45(3), pages 644-668.
    10. Magda Malec, 2017. "Redystrybucja wewnątrzpokoleniowa w systemie emerytalnym," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 4, pages 63-81.
    11. Kirill Moiseev, 2024. "Modeling the transition from pay-as-you-go to a fully funded pension system in Russia," Papers 2410.14004, arXiv.org.
    12. Bielecki Marcin & Makarski Krzysztof & Tyrowicz Joanna, 2018. "Illusory Gains from Privatizing Social Security when Reform is Politically Unstable," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 24(2), pages 1-12, May.

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