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Rethinking the Welfare State

The Political Economy of Pension Reform

Edited by Martin Rein and Winfried Schmähl

In this book a distinguished group of contributors discuss the changing political economy of pension reform. They focus on those countries which have launched a significant reframing of their pension system. Each chapter provides a detailed review of recent pension reforms and offers institutional evidence of the extent to which these reforms suggest a redirection of the welfare state towards a more public-private mix of policies. The countries were selected to represent the variety of new directions which mature industrial countries as well as countries in transition have taken.
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Chapter 11: Home-made Pension Reforms in Central and Eastern Europe and the Evolution of the World Bank Approach to Modern Pension Systems

Michał Rutkowski


Michal Rutkowski One of the most interesting elements of a wave of pension reforms in Central and Eastern Europe is that those reforms were home-made: very different from the Chilean prototype, and not really following what was then perceived as ‘the World Bank view’, that is, promoting a Chilean-type reform as a blueprint in all client countries.1 The World Bank played a certain role in the reform process; however, the views espoused by the Bank were simply different from those commonly believed. The first section of this chapter describes the views of the Bank, especially the transition from the research report, ‘Averting the Old-Age Crisis’ (World Bank, 1994) to ‘World Bank Position on Pension Reforms’ (edited by Robert Holzmann, in preparation). The second section examines pension reform developments in Central and Eastern Europe (CEE), especially in Hungary and Poland, in the light of those changes in the prevailing approach to pension reforms. EVOLUTION OF VIEWS ON PENSION REFORMS The World Bank has always supported a strong funded pillar as part and parcel of a fully reformed scheme. However, the approach of the Bank in the late 1990s had more nuances and actual reform design and implementation were made dependent on country circumstances and preferences. With its 1994 publication, the Bank developed arguments for a multipillar pension system. The proposed model system consisted of a mandated unfunded and publicly managed defined benefit scheme as a first pillar, a mandated but funded and privately managed defined contribution...

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