Social Security Issues in Reforming and Transition Economies

MacKellar, F.L. & McGreevey, W.P. (1995). Social Security Issues in Reforming and Transition Economies. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-95-028

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Abstract

This paper describes a stages-of-development model according to which, as living standards rise, the responsibility for insuring against risks associated with retirement is laid upon Government in the form of emerging social security systems. Later, political support for the continued expansion of social security systems weakens, and containment becomes the order of the day. Clear signs of such containment were evident in the OECD economies during the 1980s.

However, this model appears not to describe the development of social security in reforming (essentially, Latin American) and transition (essentially, Eastern and Central European) economies, where social security systems have become sources of distortion and imbalance at levels of development much lower than those that prevailed in OECD economies when policy makers first expressed concern and began to implement measures to correct those imbalances. A social security reform agenda is discussed which would shift more risk to the individual, taking reforming and transition economies into relatively unexplored territory. The social costs of economic reform and of transition from command to market economy have been greater than many analysts anticipated, and how reforms will be implemented in the currently difficult atmosphere remains to be seen, as does the long-term viability of reformed social security systems.

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