## Macroeconomic Effects of Pension Reform in Russia

_IMF Working Papers, August 1, 2008_

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## Bibliographic details
- Authors: David Hauner
- Published: August 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451870596.001

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### Summary
- 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 the author's 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.

### Major Findings
- The DSGE model calibrated to Russia's economy provides general equilibrium analysis previously lacking in the policy debate.
- Optimal financing of a minimum public pension benefit:
  - Prefer financing through lower government consumption.
  - Avoid higher taxation of labor and capital.
- Trade-off between public investment and consumption taxes:
  - Reducing public investment spending is superior to increasing consumption taxes unless investment generates high rates of return.

### Policy Recommendations
- Finance a minimum benefit level in the public pension system by reducing government consumption.
- Avoid increasing labor and capital taxation to finance pension benefits.
- Prioritize evaluation of public investment returns; only when investments generate high rates of return should reductions in investment be avoided in favor of consumption tax increases.

### Subjects and Keywords
- Subject: Aging, Pension spending, Pensions, Public debt, Retirement
- Keywords: debt, financing, rate, replacement rate, WP, yield

*Source: "Macroeconomic Effects of Pension Reform in Russia", David Hauner, IMF Working Papers 2008, 201 (2008).*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/macroeconomic-effects-of-pension-reform-in-russia-22297_