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).