Wage and Pension Pressure on the Polish Budget

Alain de Crombrugghe

No 1767, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper studies the role of wage and pension pressures in explaining the budget deficit crisis of 1991–2 after the remarkable 1990 Polish economic stabilization and liberalization. It also explains the persistence of the high tax wedge that later helped overcome the budget crisis. The positive revenue effect of higher wages and higher tax rates could not compensate both the inevitable profit tax loss and the excessive growth of replacement income expenditure. Counterfactuals are constructed for revenue and expenditure. They show that the rising number of social benefit earners (pensions, unemployment) is responsible for a large part of the budgetary burden. Nevertheless, they also show that the better protection of social income compared to other income also explains part of the burden. Part of the employment loss and of the social expenditure can be ascribed to the excessive wage recovery of late 1990 and 1991. Insiders set wages ignoring the unemployed and exploiting the pension system in a context of uncertainty about profits and productivity and of strong popular support for the protection of replacement income.

Keywords: Budget Deficit; Pensions; Poland; Retirement; Transition; wage level (search for similar items in EconPapers)
JEL-codes: H55 H62 J26 J30 (search for similar items in EconPapers)
Date: 1997-12
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=1767 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

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:cpr:ceprdp:1767

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=1767

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().