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The Adventures of Pension Reform in Russia: Where Are the Mistakes?

Author

Listed:
  • Danielyan, V.

    (Central Economics and Mathematics Institute, Russian Academy of Sciences, Moscow, Russia)

  • Polterovich, V.

    (Central Economics and Mathematics Institute, Russian Academy of Sciences, Moscow, Russia)

Abstract

Pension reform continues for many years, but its goals have not been achieved: the attempt to introduce the fully-funded system failed, the Pension Fund still relies on the transfers from the state budget, and the increase in the retirement age has caused mass discontent among the population. Comparing the general recommendations for reforming (Polterovich, 2007, 2012a) and the actual policy, we find that the reformers repeated standard mistakes. They tried to copy the modern Western institutions, not taking into account the experience of developing countries and the present resources, as well as cultural and institutional constraints. They didn't seek to compensate the losers; did not predict the natural reaction of citizens to reforms that reduce their welfare; they ignored a number of other costs of reform, including reducing the level of participation due to the exit of workers to the shadow sector. In addition, the goals of the reform were formulated not quite correctly. Besides, the analysis shows that, while continuing pension reforms, it is necessary to consider more consistently the requirements of gradualism and flexibility.

Suggested Citation

  • Danielyan, V. & Polterovich, V., 2019. "The Adventures of Pension Reform in Russia: Where Are the Mistakes?," Journal of the New Economic Association, New Economic Association, vol. 42(2), pages 186-194.
  • Handle: RePEc:nea:journl:y:2019:i:42:p:186-194
    DOI: 10.31737/2221-2264-2019-42-2-11
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    References listed on IDEAS

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    Cited by:

    1. Elena Vitalyevna Vasilyeva & Alexander Nikolaevich Tyrsin, 2021. "Age Differentiation in Wages in the Russian Labor Market: Identification of the Causes," Spatial Economics=Prostranstvennaya Ekonomika, Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences (Khabarovsk, Russia), issue 3, pages 103-132.

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    More about this item

    Keywords

    pension reform; pay-as-you-go system; fully-funded system; retirement age; reform costs; gradual reform; institutional flexibility;
    All these keywords.

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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