Mandatory Pension System and Redistribution: The Comparative Analysis of Institutions in Baltic States

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Abstract

Mandatory pension systems occupy a central role in the system of social security because of the share of social expenditure in national economies. One of the goals of pension system is to redistribute incomes among individuals. However, it is not clear how the intentions to redistribute incomes coincide with the outcomes. In this paper, we will study the difference between the intentions as they are articulated within institutions, with the outcomes that are generated by them. We use the method of comparative institutional analysis in order to find out the differences. Our comparative institutional analysis is based on the grammar of institutions that is proposed by Crawford and Ostrom. Also, in order to understand the differences, we will compare the institutions in relatively similar cases – the Baltic States. The results show that there is a gap between the intentions and outcomes to redistribute incomes among individuals. The findings from the comparative institutional analysis suggest that the most redistributive old age pension system is in Estonia. However, according to the factual information from Eurostat, the greatest distributive effect is produced by the mandatory pension system of Lithuania.

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