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

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  • ALTIPARMAKOV, NIKOLA
  • NEDELJKOVIĆ, MILAN

Abstract

Analyses of pension funding effects on economic growth should differentiate between ‘carve-out’ 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.

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  • Altiparmakov, Nikola & Nedeljković, Milan, 2018. "Does pension privatization increase economic growth? Evidence from Latin America and Eastern Europe," Journal of Pension Economics and Finance, Cambridge University Press, vol. 17(1), pages 46-84, January.
    • Handle: RePEc:cup:jpenef:v:17:y:2018:i:01:p:46-84_00
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    Cited by:

    1. Partha Sen, 2023. "Social security reform and welfare in a two sector model," The Japanese Economic Review, Springer, vol. 74(2), pages 233-249, April.
    2. Beetsma, Roel & Jensen, Svend E. Hougaard & Pinkus, David & Pozzoli, Dario, 2024. "Do Pension Fund Equity Investments Raise Firm Productivity? Evidence From Danish Data," Working Papers 2-2024, Copenhagen Business School, Department of Economics.
    3. Katarina R.I. Keller, 2019. "The effects of private social security accounts on economic growth in Eastern Europe," Economics Bulletin, AccessEcon, vol. 39(2), pages 1348-1360.
    4. Alessandro Bucciol & Martina Manfre' & Gregorio Gimenez, 2019. "Household Financial Decisions After the 2008 Chilean Pension Reform," Working Papers 10/2019, University of Verona, Department of Economics.
    5. Michiel Bijlsma & Johannes Bonekamp & Casper Ewijk & Ferry Haaijen, 2018. "Funded Pensions and Economic Growth," De Economist, Springer, vol. 166(3), pages 337-362, September.
    6. Mariam Voskanyan, 2023. "Funded Pension System Of Armenia: Problems, Development Prospects, Role In Economic Growth," Economic Archive, D. A. Tsenov Academy of Economics, Svishtov, Bulgaria, issue 1 Year 20, pages 3-23.

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