Reforming pensions : the limits of diversification

Drahokoupil, Jan ; Domonkos, Stefan

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Document Type: Working paper
Year of publication: 2013
The title of a journal, publication series: ETUI Policy Briefs
Volume: 3/2013
Place of publication: Brussels ; Mannheim
Publishing house: ETUI
Publication language: English
Institution: Außerfakultäre Einrichtungen > Graduate School of Economic and Social Sciences- CDSS (Social Sciences)
Subject: 300 Social sciences, sociology, anthropology
Abstract: The assumed benefits of diversification – reducing the reliance of individuals on one form of retirement insurance – currently inform policy advice on pension reforms. The diversification argument also often justifies reforms of old age pensions, including their privatization. However, the merits of diversification, particularly if pursued through privatization, are questionable. First, actual gains from diversification are limited. Private pension systems are not immune to regulatory risks, as often assumed. Moreover, diversification cannot protect against the macroeconomic shocks that represent the main challenges for pension systems. Secondly, the macroeconomic gains from private pillars are often overestimated in the policy debate. Finally, the costs of diversification through privatization are very high, despite the popular myth about reducing the implicit debt. In reality, retaining debt in its implicit form is the preferable option for public finances.

Dieser Eintrag ist Teil der Universitätsbibliographie.

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