Old age security in transitional economies

The former communist countries in Eastern Europe and Central Asia (EECA) are undertaking their second great social experiment of the century: the transition from authoritarian central planning to a market economy. One of the many problems they face during the transition is what to do with their pension systems. Their problems are more complex than countries elsewhere at the same income level for three reasons. First, the systems are mature, with high and sharply rising dependency rations. Second, pension coverage is more extensive than in most other middle-income countries, because of over industrialization and the collectivization of agriculture. Third, pension reform is being undertaken at the same time as other fundamental economic changes. The timing, sequence and political economy of pension reform are complex. The author reviews the main feature of existing EECA pension systems, identifies the major reform issues and reform options, discusses obstacles to reform, and proposes a sequence for reform. She focuses primarily on the richer, older European countries of the EECA, where pension systems have matured. Paradoxically, pensions are low in those countries, yet expenditures as a proportion of GDP are high. The main reason for this is the very lowage of retirement, which means a short contribution period and a high dependency ratio. EECA governments must bring spending promises in line with a more realistic revenue ceiling. What makes reform so difficult is that too many people have already retired. Especially during the transition, when there are few opportunities to acquire wealth and some intergenerational redistribution is needed, the retirees need a safety net whether or not they deserve one on the basis of age alone. The author's recommendations are designed to make the system more equitable and efficient for this group. Four years after the fall of the Berlin Wall, pension reform has been elusive in EECA despite the severity of the problem. The author identifies several reasons for this. First, the extent of the pension system crisis was not foreseen in the early days of the transition (except perhaps in Hungary). Indeed, some countries expanded entitlements to help induce the labor market to adjust. As the depth of the problem became clear, EECA countries have tried to formulate reform programs, but only Albania has passed legislation substantially reducing entitlements. Another reason reform has proved difficult in EECA countries is that governments have tried to reduce the scope of the public pillar without providing an alternative to assure old-age security. Failure to begin developing other pillars (based on savings and insurance principles) to meet the active generation's needs for old-age security may have doomed reform efforts from the start.Environmental Economics&Policies,Economic Theory&Research,Banks&Banking Reform,Pensions&Retirement Systems,Municipal Financial Management

Latvian pension reform

In 1995, Latvia became the first country in Central and Eastern Europe to implement parametric reform of the Soviet-style PAYGO pension system, and the first in the world to implement the"notional defined contribution (NDC) system"originally designed for Sweden. The Government's intention was to follow the overhaul of the PAYGO system with the creation of a funded second tier by 1998, but the reform has lagged. Public acceptance of the new system has been poor, and pressures for rollback of the reforms have grown. After such a splashy beginning why did the Latvian reform stall? What has been the net effect of the reforms after the roll backs? How did Latvia balance the difficult issues of system incentives, fairness, and affordability? What are the lessons of the Latvian experience with the NDC system for other reforming countries? These questions are the subject of this paper. It includes a description of pre-reform situation, describes the key provisions of the original reform, and discusses the subsequent amendments. The impact of the reform is assessed on the basis of macroeconomic and microeconomic simulations. On the basis of those, the reforms are evaluated and conclusions for other countries are drawn.Pensions&Retirement Systems,Banks&Banking Reform,Environmental Economics&Policies,Economic Theory&Research,Gender and Law

Redirecting resources to community based services : a concept paper

A legacy of the command economy in Central and Eastern Europe and the former Soviet Union is a social protection system that emphasizes institutional care for vulnerable individuals. It has been well established that in many cases institutionalization can be more expensive per client served and produce inferior welfare outcomes than more inclusive approaches designed to support individuals within their families and communities. But countries seeking to change the model of services face a number of financial constraints, including redirecting resources away from institutions. How can countries develop the new programs in an affordable manner? How should they change the financing flows to support the new options, without putting the burden of financing on the vulnerable themselves? The objective of this paper is to provide a framework to help countries re-orient their financing systems for social care. The paper first reviews key concepts in social care financing and then applies them to the problem of changing social care models in ECA countries.Banks&Banking Reform,Public Sector Economics,Health Economics&Finance,Environmental Economics&Policies,Governance Indicators

The household enterprise sector in Tanzania : why it matters and who cares

The household enterprise sector has a significant role in the Tanzanian economy. It employs a larger share of the urban labor force than wage employment, and is increasingly seen as an alternative to agriculture as a source of additional income for rural and urban households. The sector is uniquely placed within the informal sector, where it represents both conditions of informal employment and informal enterprise. This paper presents a case study on Tanzania using a mixed approach by combining both quantitative and qualitative analysis to examine the important role of household enterprises in the labor force of Tanzania, and to identify key factors that influence their productivity. Household enterprise owners are similar to typical labor force participants although primary education appears to be the minimum qualification for household enterprise operators to be successful. Access to location matters -- good, secure location in a marketplace or industrial cluster raises earnings - and access to transport and electricity is found to have a significant effect on earnings as well. In large urban areas, the biggest constraint faced by household enterprises is the lack of access to secure workspace to run the small business. Although lack of credit is a problem across all enterprises in Tanzania, household enterprises are more vulnerable because they are largely left out of the financial sector either as savers or borrowers. Although HEs are part of the livelihood strategies of over half of households in Tanzania, they are ignored in the current development policy frameworks, which emphasize formalization, not productivity. Tanzania has a large number of programs and projects for informal enterprises, but there is no set of policies and program interventions targeted at the household enterprise sector. This gap exacerbates the vulnerability of household enterprises, and reduces their productivity.Access to Finance,Banks&Banking Reform,Labor Markets,Population Policies,Debt Markets

Is informality welfare-enhancing structural transformation ? evidence from Uganda

While Africa's recent decade of growth and poverty reduction performance has been lauded, concern has been expressed regarding the structure of this growth. In particular, questions have been raised about whether the growth is based on a commodities boom, or whether it is the beginning of a structural transformation that will lift workers from low-productivity jobs into higher-productivity ones. Macro evidence has suggested that the structural transformation has not started. But macro analysis misses the evidence that the process of transformation has started, because this process begins at the household level. Household livelihoods do not move from ones based on subsistence farming and household level economic activities into livelihoods based on individual wage and salary employment away from the household in one leap -- this process takes generations. The intermediate step is the productive informal sector. It is income gains at the household level in this sector that fuel productivity increases, savings, and investment in human capital in this sector. Ensuring that most households are able to diversify their livelihoods into the non-farm sector through productive informality not only increases growth, but also allows the majority of the population to share in the growth process. This paper illustrates this point with the case of Uganda which followed this path and experienced two decades of sustained growth and poverty reduction.Rural Poverty Reduction,Achieving Shared Growth,Labor Policies,Regional Economic Development,Economic Theory&Research

Taking Stock of Research on Regional Migration in Sub-Saharan Africa

This study reviews a host of issues related to international migration in Sub-Saharan Africa and presents an overview of the state of the art of research and knowl-edge. Its aim is to identify policies and research areas that will improve understanding and management of migration in Sub-Sahara Africa and help maximize the potential benefits of migration, especially for poor people, while minimizing its risks and costs. The study covers a broad range of issues in the migration literature, but is not exhaustive. This report first provides a historical overview of migration in Sub-Saharan Af-rica and then examines the scale and regional trends of migration. It explores the intersec-tions between migration and labor market and the links between migration and develop-ment. It also looks at institutions and policies and investigates issues related to politics, ethics, and migration before exploring implications for further investigation.Migration; Remittance; Economic development; Sub-Saharan Africa

Institutions and labor market outcomes in Sub-Saharan Africa

The authors use firm-level surveydata from the manufacturing sector in 20 Sub-Saharan African countries to explore the links between labor market regulations and net job creation. A first look at firm characteristics, perceptions, and the dynamics of employment at the firm level suggests that labor regulations are not the main"binding constraint"on job creation. Other issues seem more important at this level of development. The analysis estimates the determinants of net job creation incorporating the legal origin of the country as a proxy for regulation. The findings show that, after controlling for other firm-level characteristics, legal origin is uncorrelated with net job creation in the short run.Labor Markets,Labor Policies,Microfinance,Banks&Banking Reform,Labor Management and Relations

The Manufacture, Characterization and Aging of Novel High Temperature Carbon Fibre Composites.

High temperature composite materials used in aerospace applications are exposed to extremely harsh conditions and must be able to withstand moisture and extremes of temperature. This thesis has examined the effect of isothermal aging on two high temperature composite materials, a novel CSIRO composite and a commercial composite, both based on bismaleimides. Changes in mechanical properties and resin chemistry at two different temperatures were measured in order to assess the validity of accelerated aging tests. ¶ ..

Female - headed households, poverty, and the welfare of children in urban Brazil

The authors analyze the characteristics and behavior of households headed by women in urban Brazil and identify some of the consequences for child welfare on the growth of these households. The following was among their findings. First, households headed by women are a heterogeneous group, which varies strongly by region - as does the extent of poverty among them. Such households are more common in the northeast and increase with urbanization. Second, households headed by women are not, on average, a"vulnerable group"in Brazil, as some are quite well off. The subset of such households that are very poor is quite vulnerable. Households headed by women tend to be poorer in the northeast, especially around Recife, than in Porto Alegre in the south, where there is virtually no gap. Third, less than half the households headed by women contain dependent children, and only a third are headed by the stereotypical"single mother."When there are children in households headed by women, especially households headed by single mothers, the income gap is greater than in other households. As a portion of households in Brazil, households headed by women and containing children represent only 3.4 percent of urban households, but this group tends to be poor, which is worrisome for child outcomes. Poor children tend to live in households headed by women. These households are poor not because there are more children or fewer adults but because women earn less than men. Women heading households do not earn less than other women - on the contrary. However, it female heads of households earned as much as male heads of households, the average income in households headed by women would be above that for other households and fewer single mothers would be poor. The best interventions toeliminate poverty in this group are those that focus on: (a) ending wage discrimination; and (b) ending occupational segregation. Interventions that focus on raising skill levels and educational attainment for the whole workforce, including women, would also help alleviate absolute poverty, although not necessarily relative income differences."Workfare"or public employment policies would not help this group since most already participate in the labor force. Programs targeted to this group would not be particularly progressive, given the heterogeneity and income spread among these households. But the results do suggest the need for special interventions for children in households headed by women, given those children's tendency to stay out of school.Poverty Assessment,Anthropology,Town Water Supply and Sanitation,VN-Acb Mis -- IFC-00535908,Housing&Human Habitats