Reforming US public sector plans:Truths and consequences

Most public-sector pension plans in the United States provide quite generous defined benefits. Long-term projections show that full payment of these promises threatens the finances of many state and local employers, which implies that taxes will have to be increased or pensions and/or other public expenditures reduced. This article analyzes the effectiveness of measures aimed at improving the sustainability of these plans.We consider the impact of contribution increases, benefit reductions, and adjustments in the pension fund’s investment strategy. Since a pension fund can be seen as a zero-sum game, these interventions imply value redistributions among current and future plan participants and current and future tax payers. We use the value-based asset–liability management (ALM) method to estimate the value of those transfers. These imply massive value redistributions from taxpayers to plan participants that could exceed 20% of American GDP. Hence, plan sustainability may be achieved only through either substantially higher contributions or lower benefits

Financial markets trend: ageing and pension system reform

Ageing have prompted important changes in the structure of pension system with substantial differences across the most developed countries. Given that ageing populations are driving a growing need for private form of saving for retirement, the pension fund industry is like to exert an increasing influence in the financial markets. Much of the additional retirement related flows to capital markets will be intermediated by pension funds although their importance varies considerably across country. This work reviews recent change in the pension funds industry (updated at 2006) originated from pension system reform across countries as well as risk management practices, such as ALM; the paper also focus the potential implication of pension funds investments strategies on financial markets identifying the main gaps in the availability of financial instruments needed for pension funds.pension system, financial markets, pension fund industry

The impact of tax morale and institutional quality on the shadow economy

This paper analyses how tax morale and countries’ institutional quality affect the shadow economy, controlling in a multivariate analysis for a variety of potential factors. The literature strongly emphasizes the quantitative importance of these factors to understand the level and changes of shadow economy. Relatively new available data sources offer the unique opportunity to shed more light in the understanding of a topic that has received an increased attention. We find strong support that a higher tax morale and a higher institutional quality lead to a smaller shadow economy.Shadow economy; tax morale; institutional quality; government intervention; corruption

Shadow economy, tax morale, governance and institutional quality: A panel analysis

This paper analyses how governance or institutional quality and tax morale affect the shadow economy, using an international country panel and also within country data. The literature strongly emphasizes the quantitative importance of these factors to understand the level and changes of shadow economy. However, the limited number of investigations use cross-sectional country data with a relatively small number of observations, and hardly any paper has investigated tax morale and provides evidence using within country data. Using more than 25 proxies that measure governance and institutional quality we find strong support that its increase leads to a smaller shadow economy. Moreover, an increase in tax morale reduces the size of the shadow economy.Shadow economy; tax morale; governance quality; government intervention; corruption

ASSET ALLOCATION IN EUROPE Reality vs. Expectations. ECMI Task Force Report April 2020

In Europe, capital markets are expected to play a more prominent role in corporate financing, retail/institutional saving/investment and private risk-sharing altogether. In the current institutional cycle, CMU remains as relevant as ever. However, it needs rethinking at EU level and real commitment from member states. The capacity of capital markets to enhance the resilience of our societies as a whole, especially when confronted with unprecedented shocks, should certainly be given more thorough consideration. In order to contribute to the public debate, CEPS and ECMI invited relevant stakeholders– policymakers, supervisors, consumer associations, industry representatives, and academics – to take part in a dedicated Task Force on “Asset Allocation in Europe: What challenges and opportunities lie ahead?”. The main objective of our initiative was to explore meaningful ways of activating long-term savings and investment channels across the EU, with a focus on households, asset/fund managers, insurers and pension funds, under the overarching theme of sustainability in the real economy. The recent developments related to COVID-19 were also taken into account. To this end, we invite you to read the analytical sections in this final report as well as the accompanying list of recommendations