Chapter 8. Is the Egg Basket Worth Its Price? The Fiscal Implications of Pension Privatization in Eastern Europe

Abstract

Pension reform is high on the agenda of many advanced and emerging market economies, for many reasons. First, public pensions often constitute a large share of government expenditure. Second, population aging means that reforms would be needed just to keep pension spending from rising in the future. Third, in many economies, low or falling pension coverage will leave large segments of the population without adequate income in old age and at risk of falling into poverty. Although a number of studies have assessed the effects of pension reforms on fiscal sustainability, a systematic analysis of equity issues in pension systems—and how countries have grappled with these issues—has yet to be undertaken. This book brings together the latest research on equity issues related to pension systems and pension reforms in the post-crisis world. Some of the key issues covered include: the effect of pension systems on intergenerational equity and the impact of pension reforms on poverty, the effects of pension reform measures on fiscal sustainability and equity, and the fiscal consequences of achieving different equity goals. It also presents country case studies. The volume provides a rich menu of material to assist policymakers and academic audiences seeking to understand the latest research in this area, as well as the lessons and challenges for the design of reforms.

Contributor Notes

The authors are grateful to Nicholas Barr, Ivan Lesay, Teodoras Medaiskis, Ringa Raudla, András Simonovits, and Edgars Volskis for their valuable comments and help with data collection. The authors also benefited from stimulating comments from the participants of the IMF Fiscal Affairs and European Departments Conference “Designing Fiscally Sustainable and Equitable Pension Systems in Emerging Europe in the Post-Crisis World,” Vienna, Austria, March 18, 2013. The authors assume full responsibility for remaining imperfections.
Challenges and Experience