Hostname: page-component-78c5997874-dh8gc Total loading time: 0 Render date: 2024-11-14T03:26:59.288Z Has data issue: false hasContentIssue false
  • English
  • Français

Does pension privatization increase economic growth? Evidence from Latin America and Eastern Europe*

Published online by Cambridge University Press:  03 October 2016

NIKOLA ALTIPARMAKOV  and
MILAN NEDELJKOVIĆ
NIKOLA ALTIPARMAKOV
Affiliation:
Fiscal Council, Republic of Serbia, Belgrade, Serbia (e-mail: [email protected]) Faculty of Economics, Finance and Administration, Singidunum University, Belgrade, Serbia
MILAN NEDELJKOVIĆ
Affiliation:
National Bank of Serbia, Belgrade, Serbia CESIfo Network, Poschinger Street 5, 81679 Munich, Germany
Get access Rights & Permissions [Opens in a new window]

Abstract

Analyses of pension funding effects on economic growth should differentiate between ‘carve-out’ pension privatization in Latin America and Eastern Europe and typical ‘add-on’ pension funding in Western Europe and North America. We find no evidence that pension privatization in Latin America and Eastern Europe was associated with higher economic growth. The result is robust across both continents and several alternative econometric specifications. Positive growth effects are particularly unlikely in countries resorting to debt-financed privatization. Furthermore, we note the lack of positive pension privatization effects on savings in Eastern Europe, with limited evidence of positive savings effects in Latin America. These findings suggest that cost-containment parametric reforms should be given priority over carve-out pension privatization when considering options for restoring financial sustainability of public Pay-As-You-Go systems.

Keywords

H55O57E62Pension fundingeconomic growthnational savingemerging economies
Type
Articles
Information
Journal of Pension Economics & Finance , Volume 17 , Issue 1 , January 2018 , pp. 46 - 84
Copyright
Copyright © Cambridge University Press 2016 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

*

We are grateful to editor Michael Haliassos and three anonymous referees for comments that led to substantial improvements in the paper. We thank Milojko Arsic, Christian Saborowski, and participants at the 16th Banca d’ Italia Fiscal Policy Workshop for other useful comments. The views expressed in the paper do not represent the official views of the Serbian Fiscal Council or the National Bank of Serbia.

References

Acemoglu, D., Johnson, S., Robinson, J. A., and Yared, P. (2008) Income and democracy. American Economic Review, 98(3): 808–842.CrossRefGoogle Scholar
Altiparmakov, N. (2011) A macro-financial analysis of pension system reforms in emerging Europe: the performance of IRAs and policy lessons for Serbia. International Social Security Review, 64(2): 23–44.CrossRefGoogle Scholar
Altiparmakov, N. (2015) A call for more elaborate and transparent pension data to inform policy-making: a critical examination of World Bank data for Eastern Europe. International Social Security Review, 68(2): 1–25.CrossRefGoogle Scholar
Arenas De Mesa, A. and Mesa-Lago, C. (2006) The structural pension reform in Chile: effects, comparisons with other Latin American reforms and lessons. Oxford Journal of Economic Policy, 22(1): 149–167.CrossRefGoogle Scholar
Arellano, M. and Bond, S. (1991) Some tests of specification for panel data: Monte-Carlo evidence and an application to employment equations. Review of Economic Studies, 58: 277–297.CrossRefGoogle Scholar
Arza, C. (2008) The limits of pension privatization: Lessons from argentine experience. World Development, 36(12): 2696–2712.CrossRefGoogle Scholar
Barr, N. (2000) Reforming pensions: myths, truths and policy choices. IMF Working Paper No. WP/00/139.CrossRefGoogle Scholar
Barro, R. and Lee, J. (2010) A new data set of educational attainment in the world, 1950–2010. Journal of Development Economics, 104: 184–198.CrossRefGoogle Scholar
Barro, R. and Sala-I-Martin, X. (2004) Economic Growth. Cambridge, MA: MIT Press.Google Scholar
Beattie, R. and McGillivray, W. (1995) A risky strategy: reflections on the world bank report averting the old age crisis. International Social Security Review, 48(3): 5–22.CrossRefGoogle Scholar
Bertrand, M., Duflo, E., and Mullainathan, S. (2004) How much should we trust differences in-differences estimates? Quarterly Journal of Economics, 119(1): 249–275.CrossRefGoogle Scholar
Blundell, R. and Bond, S. (1998) Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1): 115–143.CrossRefGoogle Scholar
Bond, S., Leblebicioglu, A., and Schiantarelli, F. (2010) Capital accumulation and growth: a new look at the empirical evidence. Journal of Applied Econometrics, 25: 1073–1099.CrossRefGoogle Scholar
Brown, R. L. (1997) In defense of Pay-as-You-Go (Paygo) financing of social security. North American Actuarial Journal, 1(1): 1–20.CrossRefGoogle Scholar
Bruno, G. (2005) Approximating the bias of the LSDV estimator for dynamic unbalanced panel data models. Economics Letters, 87: 361–366.CrossRefGoogle Scholar
Bun, M. and Kiviet, J. (2003) On the diminishing returns of higher-order terms in asymptotic expansions of bias. Economics Letters, 79: 145–152.CrossRefGoogle Scholar
Casey, B. (2014) From pension funds to piggy banks: (Perverse) consequences of the stability and growth pact since the crisis. International Social Security Review, 67: 27–48.CrossRefGoogle Scholar
Catalan, M. (2004) Pension funds and corporate governance in developing countries: what do we know and what do we need to know? Journal of Pension Economics and Finance, 2(3): 197–232.CrossRefGoogle Scholar
Cuevas, A., Gonzales, M., Davide, L., and López-Marmolejo, A. (2008) Pension privatization and country risk. IMF working paper No. WP/08/195.CrossRefGoogle Scholar
Cusolito, A. P. and Nedeljkovic, M. (2013) Toolkit for the Analysis of Current Account Imbalances. Washington, DC: International Trade Department, World Bank.Google Scholar
Davis, E. (2002) Institutional investors, corporate governance and the performance of the corporate sector. Economic Systems, 26: 203–229.CrossRefGoogle Scholar
Davis, E. and Hu, Y.-W. (2008) Does funding of pensions stimulate economic growth? Journal of Pension Economics and Finance, 7: 221–249.CrossRefGoogle Scholar
Disney, R., Boeri, T., and Jappelli, T. (2004) Are contributions to public pension programmes a tax on employment? Economic Policy, 19(39): 269–311.CrossRefGoogle Scholar
Demirguc-Kunt, A. and Levine, R. (2001) Financial Structures and Economic Growth: A Cross-Country Comparison of Banks, Markets, and Development. Cambridge, MA: MIT Press.CrossRefGoogle Scholar
Drahokoupil, J. and Domonkos, S. (2012) Averting the funding-gap crisis: East European pension reforms since 2008. Global Social Policy, 12(3): 283–299.CrossRefGoogle Scholar
Holzmann, R. (1997) Pension reform, financial market development, and economic growth: preliminary evidence from Chile. IMF Staff Papers, 44(2): 149–178.CrossRefGoogle Scholar
Im, K.-S., Pesaran, H. and Shin, Y. (2003) Testing for unit roots in heterogeneous panels. Journal of Econometrics, 115: 53–74.CrossRefGoogle Scholar
Impavido, G. and Rocha, R. (2006) Competition and performance in Hungarian Second Pillar. World Bank Policy Research Working Paper 3876.CrossRefGoogle Scholar
James, E. (2005) Reforming social security: lessons from thirty countries. NCPA Policy Report No. 277.Google Scholar
Lane, P. and Milessi-Ferretti, G. (2012). External adjustment and the global crisis. Journal of International Economics, 88(2): 252–265.CrossRefGoogle Scholar
Laporte, A. and Windmeijer, F. (2005) Estimation of panel data models with binary indicators when treatment effects are not constant over time. Economics Letters, 88(3): 389–396.CrossRefGoogle Scholar
Mesa-Lago, C. (2002) Myth and reality of pension reform: The Latin American evidence. World Development, 30(8): 1309–1321.CrossRefGoogle Scholar
Nickell, S. (1981) Biases in dynamic models with fixed effects. Econometrica, 49: 1417–1426.CrossRefGoogle Scholar
Orszag, P. and Stiglitz, J. E. (2001) Rethinking pension reform: ten myths about social security systems. In Holman, R. and Stiglitz, J. E. (eds), New Ideas about Old Age Security: Toward Sustainable Pension Systems in the Twenty-first Century. Washington, DC: World Bank, pp. 17–56.Google Scholar
Papaioannou, E. and Siourounis, G. (2008) Democratization and growth. Economic Journal, 118: 1520–1551.CrossRefGoogle Scholar
Reece, C. and Sam, A. (2012) Impact of pension privatization on foreign direct investment. World Development, 40(2): 291–302.CrossRefGoogle Scholar
Samwick, A. (2000) Is pension reform conducive to higher saving?. The Review of Economics and Statistics, 82(2): 264–272.CrossRefGoogle Scholar
Schmidt-Hebbel, K. (1999) Does Pension Reform Really Spur Productivity, Saving and Growth?. Washington, DC: The World Bank.Google Scholar
Schwarz, A. M. and Arias, O. S. (2014) The Inverting Pyramid: Pension Systems Facing Demographic Challenges in Europe and Central Asia. Washington, DC: World Bank.CrossRefGoogle Scholar
Singh, A. (1996). Pension reform, the stock market, capital formation and economic growth: a critical commentary on the World Bank's proposals. International Social Security Review, 49(3): 21–43.CrossRefGoogle Scholar
Smith, B. (2015) The resource curse exorcised: evidence from a panel of countries. Journal of Development Economics, 116: 57–73.CrossRefGoogle Scholar
Thomas, A. and Spataro, L. (2016) The effects of pension funds on markets performance: a review. Journal of Economic Surveys, 30: 1–33.CrossRefGoogle Scholar
Thomas, A., Spataro, L. and Mathew, N. (2014) Pension funds and stock market volatility: an empirical analysis of OECD countries. Journal of Financial Stability, 11: 92–103.CrossRefGoogle Scholar
Wooldridge, J. M. (2010) Econometric Analysis of Cross Section and Panel Data. Cambridge, MA: MIT Press.Google Scholar
World Bank (1994) Averting the Old-age Crisis: Policies to Protect the Old and Promote Growth. Washington, DC: Oxford University Press.Google Scholar
World Bank (2006) Pension Reform and the Development of Pension Systems – an Evaluation of the World Bank Assistance. Washington, USA: Independent Evaluation Group.Google Scholar
Zandberg, E. and Spierdijk, L. (2013) Funding of pensions and economic growth: are they really related? Journal of Pension Economics and Finance, 12: 151–167.CrossRefGoogle Scholar