Pension Privatization and Country Risk

Cuevas, Alfredo; Gonzalez, Maria de los Angeles; Lombardo, Davide; López-Marmolejo, Arnoldo

doi:10.2139/ssrn.1992445

Cited by 3 publications

(3 citation statements)

References 19 publications

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“…The results of savings regressions are in line with Schwarz and Arias's (2014) suggestions that debt-financed transition is unlikely to increase savings. Regarding possible detrimental growth effects, we note the possibility of deteriorating investor confidence, since explicit public debt is treated less favorably than the implicit pension debt (Cuevas et al, 2008). Overall, we can conclude that the lack of political support for the strict and long-lasting austerity measures required to preclude the emergence of disguised-PAYG financing severely undermines the feasibility of carve-out pension privatization.…”

Section: Implications For Policymakingmentioning

confidence: 87%

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

Altiparmakov¹,

Nedeljković

2016

Journal of Pension Economics and Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Analyses of pension funding effects on economic growth need to differentiate between 'carveout' 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. Terms of use: Documents inJEL-Codes: J320, G280, H550, C230.

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Section: Implications For Policymakingmentioning

confidence: 87%

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

Altiparmakov¹,

Nedeljković

2016

Journal of Pension Economics and Finance

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“…Besides fiscal distress, the asymmetrical treatment of implicit pension debt and explicit public debt within the EU Stability and Growth Pact has been suggested as another driver of reform reversals (Casey, 2014;Schwartz and Arias, 2014). It should be noted that the asymmetrical treatment is entirely justified, due to both theoretical (Franco, 1995) and practical (Cuevas et al, 2008) considerations that suggest implicit pension debt is more junior and more easily manageable than public debt. Nonetheless, in practice, EU fiscal regulations did provide some additional incentives for reform reversal.…”

Section: Eu Fiscal Rules and Causes Of Reform Reversalmentioning

confidence: 99%

Another look at causes and consequences of pension privatization reform reversals in Eastern Europe

Altiparmakov¹

2017

Journal of European Social Policy

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In order for ‘carve-out’ pension privatization to improve long-term sustainability, the transition should not be predominantly debt financed, and private pension funds should deliver (net) rates of return tangibly higher than gross domestic product (GDP) growth. We show that none of the reforming countries in Eastern Europe was successful in fulfilling these two preconditions, even before the emergence of the global financial crisis. While existing literature mostly describes a recent wave of reform reversals as politically driven short-sighted policies that deteriorate long-term sustainability, we argue the contrary: that pension privatization structural deficiencies and disappointing performance allow reversals to improve the short-term stance without necessarily undermining long-term pension sustainability. We conclude that unless political consensus exists to support the multi-decade fiscal austerity required to finance pension privatization, reform adjustments and reversals can be a rational alternative to maintaining economically suboptimal or politically unstable pension systems in some Eastern European countries.

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“…This said, the impact of the EU's fiscal framework on the reversal is difficult to disentangle from market pressures during crisis- Cuevas et al (2008) find that investors put a higher weight on explicit government debt than on implicit pension liabilities in their assessment of country creditworthiness.…”

Section:  Countries With the Largest Second Pillars-as Measured By T...mentioning

confidence: 99%

Central and Eastern Europe: New Member States (NMS) Policy Forum, 2014, Selected Issues Paper

Fund¹

2015

IMF Staff Country Reports

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Pension Privatization and Country Risk

Cited by 3 publications

References 19 publications

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

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

Another look at causes and consequences of pension privatization reform reversals in Eastern Europe

Central and Eastern Europe: New Member States (NMS) Policy Forum, 2014, Selected Issues Paper

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