Macroeconomic performance and the design of public pension programmes

Abstract

I examine the impact of the design of the Irish public pension programme on two dimensions of Ireland?s macroeconomic performance: employment and the average saving rate. Two facets of the programme might affect these outcomes: the lack of generosity of the programme relative to other OECD countries, and the high degree of redistribution embedded in the programme. These characteristics suggest that the programme has little `crowding out? effect on saving rates. For employment rates, the two facets have contradictory effects that ultimately cancel out in their aggregate effect. These findings are illustrated by using a cross-country analysis to simulate a counterfactual where Ireland instead had a pension programme with the average characteristics of OECD countries (i.e., both more generous and less redistributive).