Macroeconomic Effects of Pension Reform in Russia

Putting the pension system on a sustainable footing arguably remains the biggest challenge in Russia''s economic policies. The debate about the policy options was hitherto constrained by the absence of general equilibrium analysis. This paper fills this gap by simulating their macroeconomic effects in a DSGE model calibrated to Russia''s economy-the first of its kind to the best of our knowledge. The results suggest that a minimum benefit level in the public system should optimally be financed through lower government consumption, while higher taxation of labor and capital should be avoided. Reducing public investment spending is superior to increasing consumption taxes unless investment generates high rates of return.Economic reforms;Private savings;Public investment;Consumption taxes;Aging;Value added tax;pension, replacement rate, retirement, private pension, retirement age, pensions, pension system, risk premium, basic pension, public system, pension reform, replacement rates, rate of return, pension funds, private saving, life expectancy, private pensions, private pension funds, pensioners, early retirement, pension fund, mutual funds, moral hazard, pension systems, contribution rate, notional capital, labor force, real rate of return, public pension, public pension system, tax revenue, pension saving, private investment, pension savings, tax rate, rates of return, pension expenditure, universal pensions, accumulated savings, net foreign assets, pension benefits, investors, pension problem, real interest rates, long-term projections, private pension provision, price indexation, retirement date, funded pensions, retirement decisions, pension spending, investment manager, payroll tax, minimum benefit, labor force participation, early retirement programs, informal sectors, multi-pillar system, average pension, mandatory pillar, foreign investors, voluntary pension saving, health care, pension funding, pension benefit, investment spending, liquidity constraints, full-career worker, retirement programs, benefit level, pension age, individual accounts, pension financing, mandatory savings, contribution payments, value of pensions, state pensions, tax policy, tax rates, mandatory system, pillar system, payroll taxes, contingent liability, government pension, pay-as-you-go pension systems, funded scheme, private pension systems, voluntary pension