The Multidimensional Efficiency of Pension System: Definition and Measurement in Cross-Country Studies

Abstract

The existing literature on the efficiency of pension system, usually addresses the problem between the choice of different theoretical models, or concerns one or few empirical pension systems. In this paper quite different approach to the measurement of pension system efficiency is proposed. It is dedicated mainly to the cross-country studies of empirical pension systems, however it may be also employed to the analysis of a given pension system on the basis of time series. I identify four dimensions of pension system efficiency, referring to: GDP-distribution, adequacy of pension, influence on the labour market and administrative costs. Consequently, I propose four sets of static and one set of dynamic efficiency indicators. In the empirical part of the paper, I use Spearman’s rank correlation coefficient and cluster analysis to verify the proposed method on statistical data covering 28 European countries in years 2007–2011. I prove that the method works and enables some comparisons as well as clustering of analyzed pension systems. The study delivers also some interesting empirical findings. The main goal of pension systems seems to become poverty alleviation, since the efficiency of ensuring protection against poverty, as well as the efficiency of reducing poverty, is very resistant to the efficiency of GDP-distribution. The opposite situation characterizes the efficiency of consumption smoothing—this is generally sensitive to the efficiency of GDP-distribution, and its dynamics are sensitive to the dynamics of GDP-distribution efficiency. The results of the study indicate the Norwegian and the Icelandic pension systems to be the most efficient in the analyzed group.

The Efficacy of the Retirement Pension Provision System: Modeling, and Assessing of the Case of Kazakhstan

“…In economics, the adequacy of pension provision to guarantee the material well-being of people of retirement age has ceased to be the only criterion for assessing the pension system [20]. Regarding current demographic trends, the discussion of pension system efficacy is also gaining importance [21][22][23][24]. Today, efficacy is also a fundamental criterion for improving pension system reform, based on a comparative analysis of retirement plan models in different countries [6,7,25] and adequately assessing the practical experience of their functioning [2][3][4].…”

“…It is rather difficult to find a definition of the concept of the pension system efficacy in the literary sources. An analysis of the scientific literature indicates two dimensions in approaches to assess the efficacy of pension provision: efficiency both at the macroeconomic level [21,22,26,27] and at the economic agent level (micro level) [21,23,24,28].…”

“…The second approach is based on the functioning of an accumulative mechanism, which assumes individual financing of the pension by the employee himself at the expense of a share of wages and investment income (accumulative pension system) [18]. As demonstrated by the world experience [36], conceptually, most scholars [7,21,37,38] tend to believe that the highest level of the efficacy of social guarantees for pensioners is achieved by creating a multi-tier pension system and by simultaneous operation of both models of the pension system. The symbiosis of basic public pension provision, solidarity, and accumulative components forms a stable basis for a balanced pension provision.…”

Does efficiency of the Nordic pension system evolve after crisis?

“…The idea of multidimentional efficiency of efficiency is based on building appropriate indicators and cross-countries analysis, so to group pension system by the trait. (Chybalski, 2016). Chybalski (2016) proposed four static dimensions of the pension system efficiency: GDPdistribution, Adequacy, Labor market and Cost efficiency.…”

“…(Chybalski, 2016). Chybalski (2016) proposed four static dimensions of the pension system efficiency: GDPdistribution, Adequacy, Labor market and Cost efficiency. The data were collected in the same manner (but private and public pension were taken together) than standardized and destimulants changed to stimulants (the higher the value pension system more efficient) as suggested in Chybalski (2012).…”