Political (in)stability of pension system reform

Political (in)stability of pension system reform

The 7th NBP Summer Workshop is an annual event that brings together Polish economists affiliated with both domestic and foreign institutions. During the workshop, we have a great opportunity to present our new research about the political stability of pension system privatization.

In our paper, we show that distribution of welfare costs and gains imply that abolition of funded pillar always has political support. Additionally, we examine potential coalition during voting. To do so, we capture heterogeneity in the preferences for leisure, time discount factor, and productivity.  Heterogeneity within a cohort does not affect the results. Year of birth is the stronger predictor for preference during voting.  We find that retirees always vote for abolition, abolition (almost) does not affect inequalities and correct assignment of property rights is crucial for stability.