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KMID : 1124020100260020173
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Korean Social Security Studies
2010 Volume.26 No. 2 p.173 ~ p.197
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An empirical study of the effects of the pension funds accumulation on the economic growth
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Park Mu-Hwan
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Abstract
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This paper aims to conduct an empirical study of the effect of the accumulation of pension funds on economic growth through a productivity path and derives implications related pension polices. To do that we construct a dynamic panel regression model using an unbalanced panel data of 24 OECD countries including Korea over the 1980～2008 period. An empirical analysis on this issue is conducted using the panel regression model in two directions. First, it analyzes the economic effects of the accumulation of total pension funds including autonomous pension funds and social security reserve. Second, in order to get an inference about a pension reform in terms of financing schemes, total pension funds are divided into two groups such as autonomous pension funds with the funded scheme and social security reserve with the pay as you go scheme according to the OECD pension plan classification to member countries. Then it analyzes the economic effects of the accumulation of pension funds in accordance with the difference in financing schemes. The important findings of this study are twofold. First, we found an evidence suggesting that the accumulation of pension funds might increase economic growth when these funds are the result of the funded scheme. In contrast, economic growth might be unaffected when pension funds are the result of the pay as you go scheme. Second, the effect of control variables as determinants of TFP on economic growth had the signs that were expected such that the estimated coefficients for the external openness, R&D, and financial depth were positive, but the estimated coefficients for the young & old dependency ratio were negative.
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KEYWORD
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funded scheme, pay as you go scheme, dynamic panel regression model, productivity path
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