Pension Reform in Russia: A General Equilibrium Approach

Kuznetsov Artem () and Ordin Oleg ()

EERC Working Paper Series from EERC Research Network, Russia and CIS

Abstract: This paper uses a classic, overlapping generation model to analyze the optimal transition of the Russian economy from a PAYG pension system to a funded pension system. The transition is associated with the accumulation of social capital gained by increased contributions to the pension system. The analysis of the two-period model defines the optimal rule for the choice of the present value of the pension package as a function of aggregate capital stock in the economy. In the numerical simulation, the large-scale dynamic model of the Russian economy is used to compare the welfare efficiency of three transition scenarios. All the scenarios assume that the economy shifts from a steady state with a PAYG pension system to a steady state with funded pensions though the speed of transition differs among the scenarios. The analysis suggests that transition to a funded pension system produces social welfare gains and allows one to choose the efficient transition trajectory. However, Pareto-improving transition is not achievable in the model since some age cohorts have to pay greater contributions to the pension system in order to initiate the accumulation of social capital.

Keywords: Russia; PAYG pension system; funded pension system; steady state; transition (search for similar items in EconPapers)
JEL-codes: E62 H21 H24 H55 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2001-12-12
New Economics Papers: this item is included in nep-dge, nep-pbe and nep-tra
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