Unprivatizing the pension system: the case of Poland

Abstract

In many countries the fiscal tension associated with the global financial crisis brings about the discussion about unprivatizing the social security system. This paper employs an OLG model to assess ex ante the effects of such changes to the pension reform in Poland from 1999 as implemented in 2011 and proposed in 2013. We simulate the behavior of the economy without the implemented/proposed changes and compare it to a status quo defined by the reform from 1999. We find that the changes implemented in 2011 and all of the proposed reform scenarios from 2013 are detrimental to welfare. The effects on capital and output are small and depend on the selected fiscal closure. Implied effective replacement rates are lower. These findings are robust to time inconsistency. The shortsightedness of the governments imposes welfare costs.

Political (In)Stability of Social Security Reform

“…In fact, Jarrett (2011) argues that the reduction in future pension benefits amounts to about 10% for Slovakia and as much as 21-22% for Hungary and Poland. Similar figure for Poland is confirmed by Hagemejer et al (2015b). These reforms were introduced without much political or social opposition -unlike the increases of the minimum eligibility retirement age introduced in roughly the same circumstances of the global financial crisis.…”

Intergenerational fairness from an economic perspective: Overview of some theoretical and methodological issues

“…OLG models or generational accounting are employed, usually requires simulations to study intergenerational transfers (see e.g. Mccarthy et al 2011;Makarski et al 2016;Hagemejer et al 2015;Balestra & Dottori 2012;Kotlikoff 2004;Sánchez-Romero 2013;Wrede 1999;Boldrin & Montes 2009). In this case, the one-country approach dominates.…”

Pension Funds in Poland: Efficiency Analysis for Years 1999–2013

“…The government considered the changes (which took place in the years 2011 and 2014) necessary to lower Poland's budget deficit. Many specialists called these changes "significant step backward" 7 , "un-privatizing the pension system" (Hagemejer, 2013) or even "the most drastic nationalization of private assets since Soviet times", although Polish Prime Minister Donald Tusk asserted that "it is no more than a bookkeeping change in the way to handle the public's retirement money" (Bilefsky and Zurawik, 2013).…”