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Design Errors in Public Pension Systems: The Case of Hungary

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  • András Simonovits

    (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences also Department of Economics, Central European University and Mathematical Institute, Budapest University of Technology)

Abstract

This paper discusses design errors in public pension systems, using Hungary as an illus-tration. When the communist political and economic system was replaced by democracy and market economy, the subsequent governments had even greater difficulties in de-signing consistent pension reforms than before. Double-digit inflation and deep decline in real wages called for indexation and valorisation of pensions. In addition to arbitrary pub¬lic policy, poorly designed rules even amplified the errors of the public pension system, creating notch cohorts and disadvantaged strata.

Suggested Citation

  • András Simonovits, 2014. "Design Errors in Public Pension Systems: The Case of Hungary," CERS-IE WORKING PAPERS 1414, Institute of Economics, Centre for Economic and Regional Studies.
    • Handle: RePEc:has:discpr:1414
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    References listed on IDEAS

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    1. Gábor Orbán & Dániel Palotai, 2005. "The sustainability of the Hungarian pension system: a reassessment," MNB Occasional Papers 2005/40, Magyar Nemzeti Bank (Central Bank of Hungary).
    2. Lovell, Michael C., 2009. "Social Security's Five OASI Inflation Indexing Problems," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-41.
    3. Peter A. Diamond, 2005. "Taxation, Incomplete Markets, and Social Security," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262541823, December.
    4. András Simonovits, 2003. "Modeling Pension Systems," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-59769-3.
    5. Diamond, P. A. & Mirrlees, J. A., 1978. "A model of social insurance with variable retirement," Journal of Public Economics, Elsevier, vol. 10(3), pages 295-336, December.
    6. András Simonovits, 2003. "Modeling Pension Systems," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-4039-3845-9.
    7. János Kornai, 2013. "Centralization and market reform: — An introductory study to volume III of the Life’s Work Series," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 63(3), pages 335-366, September.
    8. P. Eső & A. Simonovits & J. Tóth, 2011. "Designing benefit rules for flexible retirement: Welfare vs. redistribution," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 61(1), pages 3-32, March.
    9. Barr, Nicholas & Diamond, Peter, 2008. "Reforming Pensions: Principles and Policy Choices," OUP Catalogue, Oxford University Press, number 9780195311303.
    10. Ursula Schwarzhaupt & Salvador Valdés-Prieto, 2010. "Optimal Compulsion when Behavioral Biases vary and the State Errs," Documentos de Trabajo 389, Instituto de Economia. Pontificia Universidad Católica de Chile..
    11. Andras Simonovits, 2011. "The Mandatory Private Pension Pillar in Hungary: An Obituary," CERS-IE WORKING PAPERS 1112, Institute of Economics, Centre for Economic and Regional Studies.
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    Citations

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    Cited by:

    1. Simonovits, András, 2015. "Hogyan hat a nyugdíjszabályok hiányos ismerete a dolgozók döntéseire? [How does imperfect knowledge of pension rules affect workers decisions?]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 263-283.
    2. Stefan Domonkos & Andras Simonovits, 2016. "Pensions in transition in EU11 countries between 1990 and 2015," CERS-IE WORKING PAPERS 1615, Institute of Economics, Centre for Economic and Regional Studies.

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    More about this item

    Keywords

    public pension system; social security; Hungary; design errors;
    All these keywords.

    JEL classification:

    • H1 - Public Economics - - Structure and Scope of Government
    • H8 - Public Economics - - Miscellaneous Issues

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