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

Published online by Cambridge University Press:  03 October 2016

NIKOLA ALTIPARMAKOV  and
MILAN NEDELJKOVIĆ
NIKOLA ALTIPARMAKOV
Affiliation:
Fiscal Council, Republic of Serbia, Belgrade, Serbia (e-mail: nalti@yahoo.com) Faculty of Economics, Finance and Administration, Singidunum University, Belgrade, Serbia
MILAN NEDELJKOVIĆ
Affiliation:
National Bank of Serbia, Belgrade, Serbia CESIfo Network, Poschinger Street 5, 81679 Munich, Germany
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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.

Keywords

H55O57E62Pension fundingeconomic growthnational savingemerging economies
Type
Articles
Information
Journal of Pension Economics & Finance , Volume 17 , Issue 1 , January 2018 , pp. 46 - 84
Copyright
Copyright © Cambridge University Press 2016 

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Footnotes

*

We are grateful to editor Michael Haliassos and three anonymous referees for comments that led to substantial improvements in the paper. We thank Milojko Arsic, Christian Saborowski, and participants at the 16th Banca d’ Italia Fiscal Policy Workshop for other useful comments. The views expressed in the paper do not represent the official views of the Serbian Fiscal Council or the National Bank of Serbia.

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