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Public Sector Pension Policies and Capital Accumulation in Emerging Economies

Gerhard Glomm (), Juergen Jung (), Changmin Lee () and Chung Tran

No 2009-10, Discussion Papers from School of Economics, The University of New South Wales

Abstract: In many emerging economies pension programs of public sector workers are more generous than pension programs of private sector workers. In this paper we investigate public pension reforms that improve efficiency and welfare by reallocating government resources from non-productive public pensions to productive public education and infrastructure investments. We argue that the opportunity costs of running generous public pension schemes for civil servants are potentially large in emerging economies that often suffer from low public investments in education and infrastructure. In addition, we quantitfy the savings distortions as well as the tax distortions from running a generous public pension program. Calculating transitions to the post-reform steady state, we find that welfare losses for the generation born before the reform are offset by welfare gains by the generations born after the reform.

Keywords: Social Security Reform; Generous Public Sector Pensions; Capital Accumulation; Public Education and Infrastructure Investments (search for similar items in EconPapers)
JEL-codes: E62 H41 H55 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2009-06
New Economics Papers: this item is included in nep-dev, nep-edu and nep-mac
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