Work detail

Viability of Reformed Pension Systems in Hungary and Poland

Author: Mgr. Petr Hedbávný
Year: 2003 - summer
Leaders: doc. Ing. Ondřej Schneider MPhil., Ph.D.
Work type: Economic Policy
Language: Czech
Pages: 87
Awards and prizes: M.A. with distinction from the Dean of the Faculty of Social Sciences for an excellent state-final examination performance and for an extraordinarily good masters diploma thesis
Abstract: In this diploma thesis pension reform is perceived as a reform of rules, while these rules should reflect voters preferences about redistribution via pension system. The proposition of Kydland and Prescott (1977) that discretionary policy is not optimal if individuals are able to predict the steps of policymakers at least to some extent is used for the analysis in the area of the pension system. The implication for the timing of the pension reform is the following: whether the existence of discretionary setting of parameters accelerates the reform or not, depends primarily on the value of the individuals discount factors.
The central topic of this thesis is the viability of a reformed pension system. A viable pension system is such that delivers maximum expected pension given voters preferences about redistribution via pension system. The requirement for the development of a viable pension system is a wide consensus across political parties, tripartite and other possible strong interest groups. The viability of the pension system is endangered if the setup of the pension system makes it possible for some economic actors to follow individual maximization strategies at the expense of other pension system participants. Thus the main danger for the pension systems viability is such a policymakers decision or behaviour, which either makes it possible to follow perverse maximization strategies (rent-seeking, free-riding etc.) or does not forestall them. Both the earmarking of funds to finance the transition to the reformed pension system and the existence of actuarial projections of the pension systems finances under alternative scenarios of the development of macroeconomic and demographic parameters increase the likelihood that the pension reform will be implemented in the spirit of the passed legislation.
Subsequent analysis of the viability of different pension systems implies that the choice of a suitable pension system depends on the institutional environment in the country.
In the empirical part, Hungarian and Polish pension reforms launched in the second half of 1990s are discussed. In both countries, the level of the consensus achieved about the setup of the reformed pension system influenced the way reforms were implented.
Downloadable: Diploma Thesis - Hedbávný




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