CEU Electronic Theses and Dissertations, 2015
| Author | Latorre Artus, Remberto José Miguel |
|---|---|
| Title | PENSION REFORM REVERSALS: CAN ROBUST INSTITUTIONS AVERT A NEW TRAGEDY OF THE COMMONS? - EVIDENCE FROM CHILE (1980-2007) AND THE CLUB SEP COUNTRIES (2008-2015) |
| Summary | Since the outbreak of the great recession several economies from Latin America and Central and Eastern Europe have reversed their pension reforms through the full or partial nationalization of the pensions second tier, bestowing government officials with fiscal space and greater flexibility for public spending. The tradeoff, however, has been the increase in the implicit and explicit debt, generating regime uncertainty and demonstrating the institutional weakness of pension systems. The principles of robust political economy stress the often-overlooked idea of limited benevolence and the Hayekian knowledge problem. The theory suggests that in a context of imperfect information, decisions should be made within institutions that facilitate learning over time. In the context of self-interested behavior, it suggests that decisions should take place within institutions that can withstand the stresses brought by human imperfections. Under this umbrella, we can relax ideal assumptions about individuals’ motivations and information and as such, we can evaluate the ability of a pension system to potentially channel both the incentives they provide and the opportunistic behavior in ways that maximizes the overall level of societal welfare. Drawing on the precepts of Robust Political Economy and Looking into Chile’s pension revolution over the period 1980-2007 and into the ongoing reversals of the Club SEP countries over the period 2008-2015, I explore the circumstances under which voters, politicians and bureaucrats are incentivized to act opportunistically within the domain of pension systems. I then evaluate what set of political economic provisions have empirically limited the scope of human action when the incentives for depletion emerge and to what extent these institutional arrangements have channeled selfish behavior into maximizing the normative objectives of pensions. I find that Chile is the only country that passes the test of institutional robustness. Chile’s relative success (vis-à-vis the Club SEP countries) rest on the knowledge-generating properties of the original reform based on dispersed ownership, and on the exit properties provided by low switching costs and dispersed administration. I argue against the World Bank’s endorsed multi-tier system and in favor of a single-pillar scheme à la Chile. |
| Supervisor | Horvath, Julius |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2015/latorre-artus_remberto.pdf |
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