Why Sweden's pension reform was able to be successfully implemented

Governments that do not reform pay-as-you-go (PAYG) pension systems will eventually face a pension crisis. In a democracy, reforms require majority support. The problem is that pension reform requires today's generation to bear the burden to avoid burdening tomorrow's generation. Sweden recently passed pension legislation that specifies a gradual transition from a public defined-benefit plan to a defined contribution plan. Why was Sweden successful in reforming its pension system? We find that a political economy perspective helps to answer this question: there are more winners who would vote in favour of the reform than non-winners who would vote against it. When comparing the net effect (present value of expected benefits minus present value of remaining contributions) of the new and old systems, contributions of the working generation (age < 53) are reduced by more than their expected benefits.     

Contribution-based vs. earnings-related retirement pension systems: some policy proposals for Italy

This paper analyses the relationship between contributions paid and benefits received within the current old age pension scheme, evaluating the implications of reinforcing the link between individual contributions and benefits, in a framework where welfare assistance and social security are kept separate. Section 2 describes the theoretical model, adopted to examine the factors affecting the contribution-based and the earnings-related annual pension or the total pension benefits over the entire retirement period. The consequences that different levels of relevant parameters have on the ratio between the two yearly pensions are, then, analysed. Section 3 illustrates the longitudinal sample of private employees belonging to the National Institute for Social Security (INPS–FPLD), in particular of those who will retire between 1995–96 and 2001: it is used to calculate the annual earnings-related and contribution-based pension. In aceteris paribussituation, allowing for all intragenerational redistribution transfers currently provided by the pension system (through a supplement to an established minimum pension, through ceilings and reversory rights), the annual contribution-based pension appears to be in 1995 about two thirds of the annual earnings-related one. This implies that the State could currently save one third of its expenditure for new FPLD pensioners, by simply switching to a criterion of social security fairness (giving each to his own in actuarial terms) without relinquishing any of the distributive corrections currently enacted within the pension system. Through this potential reform, in the next 7 years total State savings at constant prices would reach 14 000 billion lire, or 2·2% of the stock value of pensions in the same time interval.     

Pension Reform during the Demographic Transition

The aim of this paper is to quantify the welfare effects of some currently discussed pension reform proposals in Germany. The analysis is based on an extended overlapping-generations model which accounts for intra-generational heterogeneity, rising life expectancy and declining fertility. Given a baseline path of the economy under the existing unfunded pension system, the model calculates the macroeconomic impact as well as the distributional and efficiency effects of various pension reform measures aimed at reducing the level of the future unfunded pension system. Simulations reveal that pension reforms cannot be evaluated solely in terms of inter- and intra-generational equity. Substantial efficiency gains or losses might arise if the linkage between contributions and benefits is improved or weakened.     

Self‐Directed Pensions: Gender,Risk, and Portfolio Choices*

In this paper, I investigate gender differences in financial risk‐taking from a new perspective, and I show that gender plays a different role across the risk distribution. To evaluate risk‐taking, I exploit portfolio choices following a reform that entitles almost the entire Swedish workforce to choose a risk profile for a part of their public‐pension contributions. The novel finding is that portfolio risk does not differ much between the men and women who choose less risky portfolios, while the men who choose risky portfolios take on significantly more risk than do the women who choose risky portfolios. The findings are robust to investors choosing the default alternative, chasing past returns, rebalancing, and different measures of risk‐taking.     

Public pension and household saving: Evidence from urban China

We relate household savings to pension reform, to explain the high household savings rates in urban China from a new perspective. We use the exogenous – policy-induced – variation in pension wealth to estimate explicitly the impact of pension wealth on household savings, and obtain evidence of a significant offset effect of pension wealth on household savings. Although the size of the effect depends on the parameter values assumed, the finding that household savings are affected by pension reform is robust. Our estimates show that, under plausible scenarios, pension reform boosted household savings rates in 1999 by about 6–9 percentage points for cohorts aged 25–29 and by about 2–3 percentage points for cohorts aged 50–59. Our results also indicate that declining pension wealth reduces expenditure on education and health more than on other consumption items.     

缩小企业与机关事业单位退休职工养老金差距问题研究

企业与机关事业单位退休职工养老金存在较大差距,从2002年开始,这个差距在400元以上;企业退休职工平均养老金占机关事业单位平均养老金的70%及以下,这极大地损害了社会保障制度的公平原则。缩小企业与机关事业单位退休职工养老金的差距需要加快事业单位分类改革、分阶段实施养老金“双轨”改革、完善企业（职业）年金制度等。     

Expectations,uncertainty and institutions. An application to the analysis of social security reforms

The aging process that many developed economies will face in the medium-term is leading to reforms in the public pensions systems in order to solve the potential financial unsustainability generated by the foreseeable increase in the expenditure in pension benefits (assuming that the current social security contributions and the eligibility conditions will remain unchanged). Neoclassical economics defends a radical reform of these systems, substituting the current pay-as-you-go (PAYGO) systems by funded systems. In this paper, using the Post-Keynesian theory as a theoretical framework, we provide an alternative reflection to that proposed by the neoclassical economics about the choice between the alternative pension systems. The focus of the paper is the advantages of the PAYGO pension systems to stabilize the expectations of future income.     

Marginal Tax Rates and Tax‐Favoured Pension Savings of the Self‐Employed: Evidence from Sweden*

In recent years, the study of how individuals respond to policies that aim at promoting pension savings has emerged as a vital area of economic research. This paper adds to this body of literature by estimating the tax price elasticity of contributions to tax‐favoured pension‐savings accounts on a population of self‐employed individuals. I exploit a unique total database over the Swedish population that covers the years 1999–2005. Using instrumental variables, I obtain a tax price elasticity estimate of ?0.51 and an income elasticity estimate of 0.13, whereas ordinary least‐squares (OLS) produces estimates that conflict with consumer theory.     

中国养老保险制度变迁的经济学分析

1980年前后随着市场化改革的进行,中国也开始了养老保险制度的改革①。自20世纪90年代建立部分基金制后,制度的转轨带来了前所未有的转轨成本和激励问题,这给羽翼未丰的中国养老保险制度带来了沉重的负担。文章透过中国养老保险制度的变迁,分析了不同时期不同利益集团是如何推动养老保险制度改革,分析了利益集团在当前情况下对下一步改革又会产生如何的影响。一种可行的养老保险制度的选择还有待进一步讨论。     

Quality-adjusted price indexes for portable computers

The aim of this article is to identify the variables affecting the decision to make contributions to personal pension plans and the amount of such contributions. For this purpose, we specify and estimate a Tobit model for a sample based on the 1995 Personal Income Taxpayers Panel prepared by the Institute of Fiscal Studies (Spanish Ministry of Economy and Finance) formed by 3041 taxpayers, of whom 358 made contributions to pension plans. Our results suggest that individuals decide to invest in pension plans on complex grounds combining the wish to benefit from tax savings and to ensure they will receive supplementary income upon retirement.     

The effects of recent Spanish pension reforms on sustainability and pension adequacy

The Spanish pension system has been recently reformed as a response to the demographic challenge and with the objective of ensuring the sustainability of the pension system in the long-term. The overall reforms include changes in the majority of the system parameters, a new indexation rule and a sustainability factor that links life expectancy and the first pension amount. The aim of this work is to analyse how these reforms affect two important features of a pension system: fiscal sustainability and adequacy. For this purpose, the real internal rate of return (IRR) of the lifetime contributions and benefits and the prospective gross theoretical replacement rate (TRR), both before and after the reforms, have been computed. The calculations are case-study based, for a few hypothetical workers who are sufficiently representative of the earnings and retirement patterns in Spain. The results show that the real IRR is 0.7 p.p. lower and the prospective gross TRR is 18 p.p. lower after the reform process for the base case of a man with an uninterrupted career of 40 years with average earnings and a retirement age of 65. In addition, pension reform process in Spain has different effects among the individuals depending on the gender, level of earnings, retirement age and career length.     

Contemporary Issues in the Ongoing Reform of the Australian Retirement Income System

The development of a sound and sustainable retirement income system is currently an important social, political and economic issue around the world as many countries face a range of pressures including an ageing population, low national saving levels, maturing Social Security programs and changing employment patterns. As a result of these pressures, the World Bank has advocated a three-pillar system which is broadly reflected in the current Australian arrangements. However, further reform is planned in Australia. The 1995–96 Federal Budget announced a proposal to introduce compulsory minimum employee contributions of 3 per cent of earnings, together with a matching income-tested government contribution. The proposal for government contributions is analysed in this article and an alternative approach is proposed. The important related issues of the taxation of superannuation and the integration between superannuation and the government-funded age pension are also reviewed. As a result, recommendations for change are made to encourage a stable long-term structure that provides retirement incomes in a simple, affordable and fair manner.     

The portable guarantee to exchange back an old defined benefit for a new defined contribution (DC) pension plan

As a defined contribution (DC) pension plan is introduced to replace a defined benefit (DB) pension plan, the portability benefit from a DC pension plan costs the employees to bear the investment risk from managing the pension fund. To protect the retirement income and maintain the portability benefit, a guarantee to exchange back the old defined benefit is supposed to be demanded for the new DC plan's participants in the guarantee market. In light of such a demand, this article applies a claim-terminating insurance pricing model to offer a contingent claims pricing model for a portable pension guarantee. Using the new labor pension plan of Taiwan as an illustration, a guaranteed DC pension will carry an extra cost of almost 50% up to over 100% of the plan's contributions over the participant's work life, given the current mandatory minimum requirement of a contribution rate of 6%.     

生育政策调整、退休年龄延迟与城镇职工基本养老保险最优缴费率

文章基于“十三五”规划建议提出适当降低社会保险费率的现实背景,从社会福利最大化视角,运用一般均衡模型对五种生育情景下不同退休年龄的城镇职工基本养老保险最优社会统筹缴费率进行测算,并分析降低社会统筹缴费率的经济效应。研究表明：（1）最优社会统筹缴费率随退休年龄的延长而下降,随人口增长率的上升而提高。0％－100％符合全面二孩政策规定的妇女生育二孩,使退休年龄为60岁时的最优社会统筹缴费率降到191．8％－196．3％,使退休年龄为65岁时的最优缴费率降到107．7％－116．4％。（2）除了受生育政策和退休年龄影响外,最优社会统筹缴费率对物质资本产出弹性、个人主观效用贴现因子和社会贴现因子的敏感性也较强。（3）降低社会统筹缴费率具有积极的经济效应,不仅能促进经济增长和增进社会福利,而且有助于完善我国多层次养老保险体系。因此,文章为降低城镇职工基本养老保险社会统筹缴费率的改革提供了依据。     

Taxing Super

Australia's taxation arrangements for retirement saving are among the most complicated in the world. It is almost unique in applying taxat all three possible points in the retirement saving cycle: contributions, earnings and benefits. Starting from the proposition that the 'best' pension tax is to tax benefits under the personal income tax, this paper proposes a 'withholding tax' arrangement which would have impacts on individual contributors equivalent to a benefit tax, while altering the time profile of tax collections to address cash-flow concerns on the part of the revenue authorities. Simulations are presented to show that individual contributors benefit from the proposed reform, and that equity across contributors in different wage bands is broadly maintained.     

PENSION FUNDING IN A UNIONIZED ECONOMY

This paper analyzes the effects of pension funding for a small open economy in which wages are subject to bargaining. Using an overlapping-generations framework, we show that a reform away from a Pay-As-You-Go towards a funded pension system will be Pareto improving only if the reform results in a reduction in the steady-state unemployment rate. However, the reduction in the unemployment rate is by no means warranted: although for pension systems which involve a limited amount of intra-generational redistribution this is likely, for systems displaying a high degree of intra-generational redistribution the unemployment rate may well rise thus preventing the realization of welfare gains.     

Risk Sharing and Efficiency Implications of Progressive Pension Arrangements*

This paper aims to quantify the welfare effects of progressive pension arrangements in Germany. Starting from a purely contribution‐related benefit system, we introduce basic allowances for contributions and a flat benefit fraction. Since our overlapping‐generations model takes into account variable labor supply, borrowing constraints as well as stochastic income risk, we can compare the labor supply, the liquidity and the insurance effects of the policy reform. Our simulations indicate that it would be optimal to introduce a flat benefit share of 50 percent and a basic allowance that amounts to 30 percent of average income. Such a reform would yield an aggregate efficiency gain of 3.3 percent of resources.     

From Generosity to Sustainability: The Austrian Pension System and Options for its Reform

Austria has one of the world's highest pension expenditures relative to GDP, largely because of the generosity of its pension system. This paper examines the institutional setup of the Austrian pension system and projects its medium- and long-term development based on current policies. The projection results show a swift worsening of the finances of the pension system. With the already high level of contribution rates, pension expenditures, and budget transfers, the results underscore the need for reform. Much of the necessary reform can, however, be achieved by maintaining the structure of the system and adjusting some of its key parameters, as begun in the recent pension accord. The paper outlines options for further reform steps.     

Pension Reform, Capital Markets and the Rate of Return

Abstract. This paper discusses the consequences of population aging and a fundamental pension reform – that is, a shift towards more pre‐funding – for capital markets in Germany. We use a stylized closed‐economy, overlapping‐generations model to compare the effects of the recent German pension reform with those of a more decisive reform that would freeze the current pay‐as‐you‐go contribution rate and thus result in a larger funded component of the pension system. We predict rates of return to capital under both reform scenarios over a long horizon, taking demographic projections as given. Our main finding is that the future decrease in the rate of return is much smaller than often claimed in the public debate. Our simulations show that the capital stock will decrease once the baby‐boom generations enter retirement, even if there were no fundamental pension reform. The corresponding decrease in the rate of return, the direct effect of population aging, is around 0.7 percentage points. While the capital market effects of the recent German pension reform are marginal, the rate of return to capital would decrease by an additional 0.5 percentage points under the more decisive reform proposal.     

ESTIMATING THE INCIDENCES OF THE RECENT PENSION REFORM IN CHINA: EVIDENCE FROM 100,000 MANUFACTURERS

An ongoing reform in China mandates employers to contribute significant amounts to employee pension funds. The current study estimates the impact of this reform on the wage, employment, and performance of firms using data from over 140,000 medium and large manufacturers in China during 2004 and 2006. We find that the nominal wages of employees were rigid, but their real wages may have declined due to the pension reform. In addition, we find an interesting dichotomy in the incidences of pension reform. In localities with high agglomeration levels, firms' profits declined because the pension burden could not be fully transferred to employees. In less agglomerated jurisdictions, firms responded positively to pension reform, possibly because local governments over‐subsidized the pension costs as a way to attract investment. (JEL H32, H55, J26)