Efficiency of the pension reform: the welfare effects of various fiscal closures

Jan Hagemejer, Krzysztof Makarski and Joanna Tyrowicz

No 2013-23, Working Papers from Faculty of Economic Sciences, University of Warsaw

Abstract: Pension system reforms involve fiscal consequences. In practice, a variety of fiscal closures may be implemented, while not all of them involve the same extent of distortions. This paper develops an overlapping generations model to analyze the case of a shift from pay-as-you-go defined benefit system to a partly funded defined contribution system. We calibrate the system to mimic the economy of Poland, which actually implemented such reform in 1999. We analyze the efficiency of the reform with two main closure types: public debt and taxes. Regardless of the fiscal closure scenario this particular reform seems to be efficient in terms of welfare and enhances economic performance. Comparing the welfare of various closures we find that while labor taxation yields relatively higher welfare gain, public debt closure involves least need for the redistribution if capital pillar is to be implemented.

Keywords: PAYG; pension system reform; time inconsistency; welfare (search for similar items in EconPapers)
JEL-codes: C68 D72 E17 E25 H55 J11 J24 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2013
New Economics Papers: this item is included in nep-age, nep-dem, nep-dge and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://www.wne.uw.edu.pl/inf/wyd/WP/WNE_WP108.pdf First version, 2013 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:war:wpaper:2013-23

Access Statistics for this paper

More papers in Working Papers from Faculty of Economic Sciences, University of Warsaw Contact information at EDIRC.
Bibliographic data for series maintained by Marcin Bąba ().