Economic Challenges of Pension Systems 3030379116, 9783030379117

Citation preview

Marta Peris-Ortiz José Álvarez-García Inmaculada Domínguez-Fabián Pierre Devolder  Editors

Economic Challenges of Pension Systems A Sustainability and International Management Perspective

Economic Challenges of Pension Systems

Marta Peris-Ortiz • José Álvarez-García Inmaculada Domínguez-Fabián • Pierre Devolder Editors

Economic Challenges of Pension Systems A Sustainability and International Management Perspective

Editors Marta Peris-Ortiz Department of Business Organization Universitat Politècnica de València Valencia, Spain Inmaculada Domínguez-Fabián Financial Economics and Accounting University of Extremadura Cáceres, Spain

José Álvarez-García Department of Financial Economics and Accounting University of Extremadura Cáceres, Spain Pierre Devolder Institute of Statistics, Biostatistics and Actuarial Science (ISBA) Université Catholique de Louvain Louvain-la-Neuve, Belgium

ISBN 978-3-030-37911-7 ISBN 978-3-030-37912-4 https://doi.org/10.1007/978-3-030-37912-4

(eBook)

© Springer Nature Switzerland AG 2020 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Foreword

Pension systems face a series of challenges. The first, demographic change, is well known. Life expectancy is rising, and in many countries, fertility is declining. As a result, populations are ageing. Globally, about 1 in 10 people are over 60 years old today; by 2050, the figure will be 1 in 5. Much of this is good news – people are living longer healthy lives – but it also poses problems for financing pensions. Second, and less widely known, is the changing nature of labour-market relationships. More than in the past, people are not necessarily in full-time employment for the whole of their career; they have spells of full-time and part-time work and selfemployment and spells outside the labour force. That fluidity poses problems for systems that rely on contributions tied to employment. A third challenge is uncertainty: economic (another economic crisis?), political (instability in the Middle East), environmental (climate change), social (population ageing) and technical (nuclear safety), as well as those connected with the prospective UK departure from the European Union and those connected with the new US administration. Each of these challenges has profound implications for pension design – the agenda of this book. DEMOGRAPHIC CHANGE. What does demographic change suggest for good pension design? A starting point is to note that there are four (and only four) ways of addressing a problem of pension finance: • Lower monthly pensions, i.e. reducing the living standards of pensioners • Higher contributions, i.e. reducing the living standards of workers • Later retirement with no compensating increase in pensions: this approach cuts benefits not by reducing living standards in retirement but by reducing the duration of retirement • Increasing output, by increasing investment in physical and human capital (thus raising labour productivity) and/or by increasing the number of workers, e.g. through immigration v

vi

Foreword

If the design of pensions in the nineteenth century had related retirement age to life expectancy, there would be much less pressure on pension finance today. The obvious policy is for pensionable age to rise in a rational way as life expectancy increases. The argument for doing so is all the stronger because many people enjoy their work and may not want to retire, not least because jobs today are generally less physically demanding than in the past. Thus, it is both necessary and desirable that in many countries, pension age has already increased or is set to do so. The main approach to declining fertility are policies to increase saving. Consumption by pensioners during longer retirements must rely on growing output. But a declining workforce will exert downward pressure on output unless offset by other factors. An appropriate response to fewer workers is to make each individual worker more productive through investment in physical capital and human capital. It is widely believed, but mistaken to think, that increased saving necessarily implies a move towards full-funded individual accounts. That is one way but not the only way. A series of major market failures (Barr 2012, Chap. 7; Barr and Diamond 2008, 2010) calls into question the simple model of choice and competition and creates strong arguments for forms of saving that are reliable, trusted and cheaply administered and involve limited or no choice for workers. Specific lessons include that: • Voluntarism plus public education are insufficient. Automatic enrolment into a pension plan is more effective: once automatically enrolled, most people will stay with the plan. • In sharp contrast with simple theory, keep choices simple, for example, offering only a small number of clearly differentiated funds. This type of constrained choice is a deliberate and welfare-enhancing design feature. • Design a good default option for people who make no choice. • Different countries arrange saving in different ways. • Australia and Chile have mandatory membership of individual accounts, with individual choice from a fairly large number of providers. • New Zealand has auto-enrolment in simple, cheaply administered savings accounts, again with a wide choice of providers. • The UK is phasing in pensions organized via the National Employment Savings Trust (NEST pensions) in which workers are auto-enrolled in a system which deliberately gives them only limited choice. • The Netherlands has a system of fully funded occupational pensions, membership of which is mandatory for workers in the industry. • In Canada, the state defined benefit pension is partially funded, aiming to cover about 25% of benefit payments from funding. The funds are managed at arm’s length from government. It is also possible to arrange additional saving outside the pension system. For example, Norway has a PAYG pension system complemented by a sovereign wealth fund, one of whose purposes is tax smoothing to accommodate the baby boomer generation of pensioners.

Foreword

vii

MORE FLUID LABOUR-MARKET RELATIONS. With long-term, full-time employment less prevalent than in the past, a typical worker has a less complete contributions record. The contributory principle no longer provides the coverage it once did. The conclusion in a growing number of countries is to introduce a non-contributory pension (also called a social pension or a citizen’s pension) based on age and residence but without a contributions test. The main purpose of such a pension is to provide poverty relief as a complement to the consumption smoothing provided by contributory earnings-related pensions. The argument for non-contributory pensions is that they strengthen poverty relief: they can cover everybody and can pay a pension high enough to provide genuine poverty relief. They also have advantages in terms of gender balance, since women tend to have more fragmented contributions records. A range of instruments helps to make non-contributory benefits affordable, notably (a) the size of the monthly pension and (b) the age at which the pension is first paid. It is possible also (c) to subject the pension to an affluence test, such that the best-off do not receive the benefit. OECD countries with non-contributory pensions include Australia, Canada, Chile, the Netherlands and New Zealand. RISK-SHARING. Individuals face risks, including over their future earnings and health, and pension systems face economic, demographic and political risks. Separately, pension systems need to adjust to social change, for example, common pension rules for men and women. The question for pension design is where risks should fall. In a pure defined contribution plan, risk falls on the individual worker; in a pure defined benefit plan, risk falls on the plan sponsor, e.g. the firm or industry. In a defined-benefit state system which cannot borrow, risk falls on contributors (since the only way to finance any deficit is through higher contributions). In a definedbenefit state system which can borrow, risk can be shared with past, current and future taxpayers via government borrowing. In assessing risk-sharing, however, it is necessary to look not just at a particular part of the pension system but at the system as a whole. Thus, a country with a generous non-contributory pension and a small defined contribution system will share risk more widely than one with a small non-contributory pension and major reliance on a defined-contribution element. The three challenges – incomplete contribution records, demographic change and uncertainty – emerge repeatedly in the chapters in this book which look at the different ways, good and bad, in which a wide range of countries grapple with them. Professor of Public Economics, London School of Economics and Political Science (LSE), London, UK

Nicholas Barr

viii

Foreword

References Barr, N. (2012). The economics of the welfare state. 5th edition. Oxford University Press. Barr, N., & Diamond, P. (2008). Reforming pensions: Principles and policy choices. Oxford University Press. Barr, N., & Diamond, P. (2010). Pension reform: A short guide. Oxford University Press. In Chinese: Shanghai: Truth and Wisdom Press, 2013. http://www.amazon.cn/gp/aw/d/ B00GQT8B0K In Spanish: La reforma necesaria: El futuro las pensiones. Madrid: El Hombre del Tres, 2012. ISBN 978-84-940161-4-1, http://www.elhombredeltres.es/index.php/la-reforma-necesaria-2 In Polish: Reformy systemu emerytalnego: Krotki przewodnik. Polskie Towarzystwo Ekonomiczne. ISBN 978-83-88700-7

Preface

Given the current economic context, which highlights the relevance of pension systems to ensure both the well-being of individuals and the development of countries, and given the new demographic reality in industrialized countries, indicating an increase in the retired population, a drop in the birth rate and a progressive increase in life expectancy, it is essential that the future of public pensions should be addressed with urgency and with the greatest possible comprehensiveness, joining the efforts of all the actors involved on its development. Societies evolve, and this raises the need to modernize or adapt pension legislation, evidenced by the reforms undertaken in recent years in practically all developed economies to face the great economic challenge of pensions. Nowadays, there is a broad consensus on the main characteristics of public pension systems: they must be sustainable, adequate and equitable. These are characteristics, first, of difficult fulfilment in themselves, which poses great challenges for the countries that pretend to carry them out; but, second and also important, they are characteristics of difficult conjunction, because it is a task for giants to match all three at the same time, and very few countries can boast of it. The economic crisis that has plagued all world economies over the past decade has had very negative effects on state incomes, while spending, especially social spending, has been maintained and even increased, and pensions are the main component of such expenditure. The issues of financial sustainability are basically related to income in three different types. First, defined benefit schemes have a formula or an indexing factor that directly relates income from contributions to individual income pensions. Second, in point systems, individuals earn pension points for every contribution they make and then convert points into a retirement pension. Third, in notional defined contribution schemes, pensions depend on the amount of contributions made and the theoretical interest credited to the individual accounts. With regard to the adequacy of pensions, the importance lies in the fact that it is a relative concept, and more in reference to pensions, since it is not possible to achieve a single figure valid for all countries and systems without taking into account the characteristics and peculiarities of each one of them. ix

x

Preface

Equity issues go beyond the definition of the concept itself, although three types can be established, with three different ways of achieving them. The first is the contributory equity, which would require reforms both in how to calculate the regulatory base and in the current scale of determination of the replacement rate for quoted years. The second is the intra-generational actuarial equity, which would mean balancing the penalties and premiums for access to retirement at different ages. And the third is the intergenerational actuarial equity, which would imply incorporating the dynamic evolution of life expectancy in the calculation of the initial pension. This book aims to cover several objectives: first of all, to inform the reader about one of the greatest economic challenges faced by absolutely all governments in the world, the economy of the elderly; moreover, to offer different views on the different situations and solutions that a vast majority of public pension systems have solved; and, last but not least, to extend a perspective on what different world experts think in these issue schemes from the perspective of analysing their own public pension systems. In this sense, this book aims to be an essential reference and discussion manual, complementing existing ones, for the academic, business context and professionals of sector. The authors of this book provide a broad overview on all these issues. The book starts with a few but very important words from Professor Mr. Nicholas Barr, who gives his particular vision of the main challenges actually faced by the public pension systems and some of the reasons why it is important to mitigate their effects to try to solve the situation. The demographic change is one of the most known one, but not the only. Mr. Barr introduces the discussion about the labour-market relations and its fluidity, due basically to the full-time employment less prevalence than in the past decades. At the same time, he briefly talks about the risk-sharing between men and women, in order to assess the social change and the consequences of the incorporation of the women to the labour market. It is definitely a very clever vision of the current pension systems situation. The book begins with five chapters where the challenges faced by pension systems are exposed: the economic crisis, the demographic changes, the changes in the labour market and the economic growth and wealth. In Chapter 1, the authors, Mr. Jose Álvarez, Mr. Amador Durán, Ms. Marta Peris and Ms. María de la Cruz del Río, present the current state of scientific production on public pension systems through a comparative bibliometric study of indexed documents in WoS and Scopus databases. In the same way, there are treated aspects such as correlation between growth, coverage, overlap, dispersion and concentration of articles. Chapter 2, written by Ms. Estefania Alaminos, Ms. Mercedes Ayuso and Ms. Montserrat Guillen, present an applied view of the evolution of the main demographic indicators in order to identify the challenges present in the design of the public pension systems, as well as its sustainability, especially important in defined benefit schemes.

Preface

xi

In Chapter 3, Mr. Robert Meneu, Mr. Borja Encinas and Ms. María de la Cruz del Río present the effects of the economic crisis in the public pension systems, in terms of economic growth versus employment and contributions, assessing that economic growth alone will not be enough to ensure the financial sustainability of the pensions in the long term. Chapter 4, written by Mr. Enrique Devesa and Mr. Rafael Domenech, provides the relationship between pensions, welfare and economic growth, analysing the effects of pay-as-you-go (PAYGO) and funded pension systems on welfare and providing six important conclusions about the debate on the choice between alternative systems. In Chapter 5, Mr. Filip Chybalski attempts to answer the question about the linkage between pension system designs and the labour market participation in European countries, using selected statistical and econometric tools to analyse the empirical data. The second block includes three chapters, where the main aspects that must be assessed in a pension system are included: sustainability, adequacy and equity. Sustainability is one of the main characteristics of the public pension systems. In Chapter 6, Mr. Enrique Devesa, Ms. Beatriz Rosado and Mr. José Álvarez review the main instruments and indicators used to measure it on the PAYGO systems, distinguishing between defined contribution and defined benefit ones. Chapter 7, written by Mr. Rober Meneu, Mr. Borja Encinas and Ms. Inmaculada Domínguez, centers on the equity of public pension systems, particularly on the concept of the actuarial equity through the internal rate of return and the contributory effort analysis, while Chapter 8, authored by Ms. Marta Peris and Mr. Carlos Rueda, focuses on the adequacy of the pension systems, describing the concept by its multiple dimensions, the single indicators used to measure it and the synthetic indicators way to give adequate information. Once exposed, the challenges and the aspects that the pension systems must safeguard, are developed in five different international chapters of pension system models. Chapter 9, written by Mr. John Turner, Mr. Gerard Huges, Ms. Agnieszka ChlonDominczak and Mr. David Rajnes, describes the international experience in the use of one particular form of insurance against poverty at advanced ages, the Longevity Insurance Benefits for Social Security, focusing on the programmes established in Ireland, Poland and China, as well as considering proposals for the provision of these benefits in Canada and the United States. In Chapter 10, Mr. Frédéric Gannon, Ms. Florence Legros and Mr. Vincent Touzé discuss the history and properties of one of the oldest pension point systems, the French one, analysing its actuarial fairness properties of the calculation rule, and propose some similarities and differences with German and Swedish one. Chapter 11, written by Ms. María del Carmen Boado, Ms. Poontavika Naka and Mr. Ole Settergren, presents some of the last lessons learned from the Swedish pension system, one of the most mature NDC systems in the world, together with its actual problems and challenges for the future.

xii

Preface

In Chapter 12, Mr. Carmelo Mesa and Mr. Diego Valero provide a perspective from 11 Latin American countries about their recent reforms on capitalization pension systems, offering general guidelines to accomplish increasing pension coverage for all of them and extracting a useful lesson for the regions observed and the world. Chapter 13, written by Mr. Farid Flici and Mr. Frederic Planchet, shows the financial sustainability of the Algerian Retirement System. After the presentation of several international models, two chapters are developed where the defined benefit and defined contribution model and the automatic adjustment mechanisms of the systems are considered, which are some of the best instruments to improve pension systems. Chapter 14, written by Mr. Pierre Devolder and Mr. Sébastian de Valeriola, presents some alternative architecture for a pension system design based on a mix between defined contribution and defined benefit public pension schemes. In Chapter 15, Ms. Carmen Boado, Mr. Humberto Godínez and Mr. Steven Haberman explore the different mechanisms of automatic balance in pay-as-you-go (PAYGO) pension schemes in terms of financial sustainability and adequacy of benefits. The role of complementary pensions is studied by Ms. Mercedes Ayuso, Ms. Montserrat Guillen and Mr. Diego Valero in Chapter 16, whose aim in this chapter is to present a comprehensive analysis of the second and third pillars as a complement to the public pension system, as well as the risks faced by them, such as longevity, inflation and interest rates. Chapter 17, written by Mr. Oscar V. De la Torre, Mr. Evaristo Galeano and Ms. Dora Aguilasocho, and Chapter 18, written by Mr. Francisco López, Ms. Marissa Martínez and Mr. Roberto Joaquín, analyse some of the main aspects of the pension funds and its various aspects, giving a very accurate idea of their configuration, management form and their current development, as well as a current vision of their nowadays situation. The book ends with two chapters: Chapter 19, written by Ms. Roberta Melis and Alessandro Trudda, and Chapter 20, written by Ms. Inmaculada Domínguez, Mr. Francisco del Olmo and Mr. José Antonio, where new model developments are exhibited and where they try to advance in the reinvention of social security in the face of the challenges they are trying to solve. These chapters represent an important cross section of the actual research in public pension systems. The problems of pensions dominate the economic problems of the countries and are subject of debates in all countries of the world. Hence, this book is of great interest, which goes beyond showing a typical approach to “pension models”. At the same time, the book shows the challenges faced by pension systems and how, with some models in continuous transition, adaptations of public and private systems are being carried out in such different countries, with similar problems related to pensions, such as Italy, Algeria, Mexico, the United States or Spain, among others. The chapters are in some cases eminently technical, others are basically informative or descriptive, a few others contain more opinion, but they all are very interesting works and will make the reader understand that Economic Challenges of Pension Systems: A Sustainability and International Management

Preface

xiii

Perspective has fulfilled its objectives initially described, summarized in one: to report on the importance of public pension systems in today’s world. Finally, the editors wish to express their deep gratitude to all those who have contributed to this publication, especially to the authors of the chapters and all the researchers and academics who collaborated in the double-blind review process. Valencia, Spain Cáceres, Spain Cáceres, Spain Louvain-la-Neuve, Belgium

Marta Peris-Ortiz José Álvarez-García Inmaculada Domínguez-Fabián Pierre Devolder

Contents

1

2

Public Pension Systems: Bibliometric Study of Academic Publications in Scientific Journals . . . . . . . . . . . . . . . . . . . . . . . . . . José Álvarez-García, Amador Durán-Sánchez, Marta Peris-Ortiz, and María de la Cruz del Río-Rama Demographic and Social Challenges in the Design of Public Pension Schemes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Estefanía Alaminos, Mercedes Ayuso, and Montserrat Guillen

3

The Public Pension Systems and the Economic Crisis . . . . . . . . . . . Borja Encinas-Goenechea, Robert Meneu-Gaya, and María de la Cruz del Río-Rama

4

Pensions, Economic Growth and Welfare in Advanced Economies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Enrique Devesa and Rafael Doménech

1

33 57

81

5

Pension Systems and Labour Market Participation in European Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 Filip Chybalski

6

Sustainability of Public Pension Systems . . . . . . . . . . . . . . . . . . . . . 125 José Enrique Devesa-Carpio, Beatriz Rosado-Cebrian, and José Álvarez-García

7

Equity of Public Pension System . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 Robert Meneu-Gaya, Borja Encinas-Goenechea, and Inmaculada Domínguez-Fabián

8

Adequacy of Public Pension Systems . . . . . . . . . . . . . . . . . . . . . . . . 173 Beatriz Rosado-Cebrian, Marta Peris-Ortiz, and Carlos Rueda-Armengot

xv

xvi

Contents

9

Longevity Insurance Benefits for Social Security: International Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 John A. Turner, Gerard Hughes, Agnieszka Chłoń-Domińczak, and David M. Rajnes

10

The French Mandatory Occupational Pension Scheme: History and Properties of a Point System . . . . . . . . . . . . . . . . . . . . 211 Frédéric Gannon, Florence Legros, and Vincent Touzé

11

Last Lessons Learned from the Swedish Public Pension System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235 María del Carmen Boado-Penas, Poontavika Naka, and Ole Settergren

12

The New Wave of Pension Reforms in Latin America . . . . . . . . . . . 255 Carmelo Mesa-Lago and Diego Valero

13

Financial Sustainability of the Algerian Retirement System: A Perspective Analysis of the 50 Coming Years . . . . . . . . . . . . . . . . 275 Farid Flici and Frédéric Planchet

14

Pension Design and Risk Sharing: Mixed Solutions Between Defined Benefit and Defined Contribution for Public Pension Schemes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 Pierre Devolder and Sébastien de Valeriola

15

Automatic Balancing Mechanisms for Pay-As-You-Go Pension Finance: Do They Actually Work? . . . . . . . . . . . . . . . . . . . 341 María del Carmen Boado-Penas, Humberto Godínez-Olivares, and Steven Haberman

16

The Role of Complementary Pensions . . . . . . . . . . . . . . . . . . . . . . . 359 Mercedes Ayuso, Montserrat Guillen, and Diego Valero

17

A Two-Regime Performance Test of the Mexican Public Pension Funds (SIEFOREs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377 Oscar V. De la Torre-Torres, Evaristo Galeana-Figueroa, and Dora Aguilasocho-Montoya

18

Regime-Switching in the Volatility of Mexican Pension Fund Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397 Francisco López-Herrera, Marissa R. Martínez-Preece, and Roberto Joaquín Santillán-Salgado

19

Critical Issues of Public Pension System: The Italian Case . . . . . . . 427 Roberta Melis and Alessandro Trudda

Contents

20

xvii

Reinventing Social Security: Towards a Two-Step Mixed Pension System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441 Inmaculada Domínguez-Fabián, Francisco del Olmo-García, and José Antonio Herce-San Miguel

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473

Chapter 1

Public Pension Systems: Bibliometric Study of Academic Publications in Scientific Journals José Álvarez-García, Amador Durán-Sánchez, Marta Peris-Ortiz, and María de la Cruz del Río-Rama

Abstract One of the main components of the so-called welfare states is Public Pension Systems, whose analysis provides an image of a country’s politics, economy, demographics and culture. There is now an intense global debate on the future viability and reforms needed to guarantee pension funding, especially in societies with high life expectancy and low birth rates. Thus, the purpose of this chapter is to present the current state of scientific production on Public Pension Systems through a comparative bibliometric study of indexed documents in WoS and Scopus databases dealing with aspects such as correlation between growth, coverage, overlap, dispersion and concentration of articles. To do this, and through an advanced search by terms, a representative set of 256 articles until 2015 that formed the ad hoc base of the analysis were selected. In view of the results, the conclusion is that although the WoS and Scopus databases differ in terms of scope, data volume and coverage policies, the documents and the results of their analysis are in many aspects similar with Scopus having greater coverage in the specific area of Public Pension Systems by collecting more journals, papers and signatures. Keywords Public Pension Systems · WoS · Scopus · Bibliometric study · Coverage · Overlap

J. Álvarez-García (*) Financial Economy and Accounting Department, University of Extremadura, Cáceres, Spain e-mail: [email protected] A. Durán-Sánchez Economy Department, University of Extremadura, Badajoz, Spain e-mail: [email protected] M. Peris-Ortiz Department of Business Organization, Universitat Politècnica de València, Valencia, Spain e-mail: [email protected] M. C. del Río-Rama Business Management and Marketing Department, University of Vigo, Ourense, Spain e-mail: [email protected] © Springer Nature Switzerland AG 2020 M. Peris-Ortiz et al. (eds.), Economic Challenges of Pension Systems, https://doi.org/10.1007/978-3-030-37912-4_1

1

2

1.1

J. Álvarez-García et al.

Introduction

The so-called welfare states are made up of a set of state institutions providing social policies aimed at protecting citizens from life-cycle risks in the areas of health, education, employment or social security. In 2016, the average social expenditure of the OECD countries was 21% of GDP, France being the country with the highest spending rate (32% /PIB) and Turkey, Korea and Mexico the countries that spent the least on social support (below 15% /PIB). On average, in OECD, pensions and health services account for two-thirds of total expenditures, with pensions accounting for the highest social expenditure (OECD 2016). Western countries have long faced a number of economic, demographic and social challenges that are causing growing concerns about the future sustainability of public pension systems, crisis and financial recession, progressive ageing of the population and the inversion of the population pyramid, shorter active phases and longer retirement phases, etc. Since the middle of 2007, the crisis and its impact have made headlines in all countries. On the one hand, what began as a credit crisis turned into a banking crisis and ended up leading to an employment and public finance crisis. On the other hand, a greater life expectancy and low birth rate increase considerably the dependency rates of an increasingly ageing population. At a global level, the proportion of older people aged 60 and over increased from 9% in 1994 to 12% in 2014 and is projected to reach 21% by 2050. Older people are the fastest growing population group. In 2014, the annual growth rate of the population of over 60 almost tripled the growth rate of the population as a whole. In absolute terms, the number of people over the age of 60 almost doubled between 1994 and 2014, formed predominantly by women. In 2014, there were 85 men per 100 women in the older people group in the world. This sex ratio will increase moderately in the coming decades (United Nations 2014). As currently configured, and in conjunction with other mechanisms that promote the division of labour, public pension systems favour the existence of inequalities in perceptions between men and women. The average gender gap in pensions in the EU-27 is 39%; 17 out of 27 countries show differences greater than or equal to 30%. The two highest percentages are for Luxembourg (47%) and Germany (44%) and the lowest, Estonia with 4% followed by the Slovak Republic (8%) (Bettio et al. 2013). All these demographic changes are generating a considerable increase in public social spending, as well as a growing concern about the future viability of public pension systems. For this reason, many countries have addressed different reforms; however, not all of them have adopted the same measures. The Pension Sustainability Index (PSI), which reflects the long-term sustainability of pension systems, shows that China and Thailand have less sustainable systems due to the forecast of their rapid ageing population and a relatively low retirement age. On the opposite side are Australia, Denmark, Sweden, the Netherlands and Norway with well-designed pension systems that put them on a long-term financially sustainable path (Finke and Sabatini 2016).

1

Public Pension Systems: Bibliometric Study of Academic Publications in. . .

3

Due to the interest aroused in the academic world, the main objective of this article is to carry out an analysis of scientific literature published and related to Public Pension Systems through a bibliometric study of articles indexed in the WoS and Scopus databases, which allows to determine which has a better coverage of the subject, as well as the overlap between them. In the same way, and as secondary objectives, the objective is to determine how much, who, what, where and how research on Public Pension Systems has been done by means of statistical methods and bibliometric indicators. In order to locate the indexed documents in both WoS and Scopus, an advanced search for terms with a time limit in 2015 was carried out in both databases. As a result, a set of 169 references of WoS and 219 of Scopus were selected, which constitute the ad hoc empirical base of the study and which were further processed through the bibliographic manager Refworks. This chapter is divided into four main sections. First, and after this introduction, we proceed to the review of the academic literature in order to establish the theoretical framework. Subsequently, Sect. 1.3 describes the methodology of calculations and the tracking strategy used for the selection of references. In Sect. 1.4, the main results obtained in the study of the basic bibliometric indicators, as well as from the analysis of overlap and singularity between the bases, are detailed. Finally, Sect. 1.5 presents the final conclusions reached and the limitations associated with the research.

1.2

Theoretical Framework

In the mid-1990s, the publication of the report “Averting the Old Age Crisis: Policies to Protect the Old and Promote Growth” (World Bank 1994) brought the need to study and discuss financially the viability of pension systems implemented in the world. In this sense, the rapid demographic changes taking place in Western countries in recent decades have led to the policy of public pension systems being one of the most debated issues within welfare states (Bonoli 2003; Taylor-Gooby 2001). The ageing process caused by the increase in life expectancy and low birth rates makes current public pension systems unsustainable in the long term (Whitehouse and Queisser 2007), a fact that has transcended public opinion. Boeri et al. (2002) found that Germans and Italians are aware that current pension systems are unsustainable and recognize the need to reform them but generally ignore the costs of the system as a whole. In the same way, Janky and Gal (2007) argue that while Europeans are aware of the negative impact of demographic changes on the pension system, they generally continue to oppose reforms. As a consequence, the working-age population loses confidence in the generational agreement that sustains the public pension system. Today’s workers expect difficulties in collecting their retirement pensions due to the possible collapse of the system (Breyer and Stolte 2001; Razin and Sadka 2007) and oppose to contributing because they consider that they will not become

4

J. Álvarez-García et al.

beneficiaries in the future (Tepe and Vanhuysse 2009). In any case, citizens will accept reforms more readily if they are better informed about the costs and peculiarities of the pension system (Boeri and Tabellini 2005). With the information currently available, the debate on pension reform is a reasonable concern. The negative effects on the future financial equilibrium of pension systems can only be understood if we accept the hypothesis that the expected growth rate of the GDP will not be enough to compensate for the expected increase in expenditure, considering the current conditions of access to pensions and contribution rates as constant (Ferreiro and Serrano 2011). In a well-known series of comparative studies between OECD countries, Gruber and Wise (1999, 2004, 2005), together with other authors, established that for the majority of developed countries the PAYG social security system includes promises that cannot be kept without significant system reforms. In the absence of reform, current systems are fiscally unsustainable. The lack of gender equality in pension systems has also been a subject discussed in depth within the academic literature. From this gender perspective, the results are conclusive in terms of inequality between men and women. As Goldin (1993) says, when economists speak of the gender gap these days, they generally refer to systematic differences in the outcomes that men and women achieve in the labour market. These differences are observed in the percentages of men and women in the labour force, the types of jobs they choose and their relative incomes or hourly wages. Many of the studies available (Dahl et al. 2003; Duval 2003; Even and Macpherson 2004; Stark et al. 2005; Monticone et al. 2008; Jefferson 2009; Marin and Zólyomi 2010) show that the pensions they receive are lower than those obtained by men. A second feature that is important in the gender analysis of pensions is the existence of a scope (the labour market), in which the difference in the amounts of women and men’s pensions originates, and of a structural factor of gender (the social division of paid and unpaid jobs), which explains the gender gap in the labour market (Vara-Miranda 2011). Although the challenges facing public pension systems (sustainability, ageing, equity, etc.) have become more apparent since the onset of the economic crisis, many countries had already begun to take various measures aimed at ensuring viability through reforms. The academic literature is not unaware of this fact, and many studies have analysed the reforms carried out in different countries for many years, in Ireland, Abid and O’Donoghue (2014); in Italy, Agudo and García (2011); in France, Aubert (2014); in Germany, Börsch-Supan (2015); in Chile, De Mesa and MesaLago (2006); in the United States, Diamond (2006); or in Spain, Vidal-Melia (2014), among many others. In most cases, the reform consists of increasing the contribution duration to obtain the full pension, reducing the pension rate or both (Alo 2004). However, in almost all cases, the tendency is towards the adoption of differentiated systems in which public pensions are complemented by individual savings and private pensions, either compulsory or stimulated by incentives (Whitehouse and Queisser 2007). According to Alda-García (2016), the different measures implemented can be divided into two blocks: parametric reforms, those related to the calculation of the public pension

1

Public Pension Systems: Bibliometric Study of Academic Publications in. . .

5

(retirement age, base calculation, benefits, etc.), and structural reforms, those that modify the pension system structure. Within the structural reforms, we can differentiate three types at the same time: distribution systems, where workers’ contributions finance pensions at that moment; funding systems, where each worker contributes to his or her own public pension; and mixed systems that have characteristics of the two previous ones. A useful tool when analysing the scientific production on public pension systems, or any other field of knowledge, is bibliometrics, capable of measuring the research activity based on the quantitative statistical analysis of the data provided by scientific literature (Sancho 1990). A common practice in recent years has been the comparison of databases that serve as a documentary source for bibliometrics. In these analyses, using both the relative singularity index (Meyer et al. 1983) and the traditional and relative overlap (Bearman and Kunberger 1977), the coverage of several databases is compared, and the overlap of one base in another one is studied (Pulgarín and Escalona 2007). Since many of the first conclusions reached in the 1960s with this new methodology (Martyn and Slater 1964; Martyn 1967) were finally invalidated (Bost 1968), later studies began to differentiate between overlapping of primary sources (Bourne et al. 1969), overlapping of secondary sources (Bearman and Kunberger 1977) and multiple overlapping (Poyer 1984). Finally, the first review on overlapping was published in 1990 (Gluck 1990). Since the appearance of Scopus in 2004, there are many examples of papers of this type, which compare it with WoS and whose objective is to identify which of the two products responds better to users’ needs. Highlights the study carried out by Goodman and Deis (2005) and the subsequent review (Goodman and Deis 2007), where such diverse aspects as prices, content and time coverage, updating, document types, search facilities, access, etc. are compared, and where it is concluded that Scopus has a greater selection of journals while WoS provides greater coverage over time, therefore they are considered complementary products (Escalona et al. 2010). Fingerman (2006) considered that Scopus have an advantage over WoS due to including, in addition to articles, other documentary types such as books or conference proceedings. In response, later versions of WoS included two new reference databases of conference proceedings. In articles such as Bakkalbasi et al. (2006) and Neuhaus and Daniel (2008), it is recommended to carry out this type of analysis in specific areas of study in order to determine which of the bases works better in each case, as this will depend on the discipline and time period analysed. Thus, studies such as Mingers and Lipitakis (2010) conclude that WoS coverage is worse in the area of business administration and management, and Santa and Herrero-Solana (2010) found that Scopus had greater journal coverage when analysing the scientific production of the main countries of Latin America and the Caribbean. Beyond the differences in scope, data volume and coverage policies, studies generally show a good correlation between WoS and Scopus due to the large number of journals indexed by both databases (Gavel and Iselid 2008).

6

1.3

J. Álvarez-García et al.

Methodology

This section describes the process followed for the preparation of the comparative study between the multidisciplinary databases WoS and Scopus in relation to the scientific production on Public Pension Systems. The objective was not to assess the content quality of the selected papers but to perform a descriptive-quantitative analysis of the papers by means of bibliometric indexes. Because the access to the entire scientific production is an unreachable goal, any bibliometric analysis is limited by the availability, relevance and reliability of information (Rueda et al. 2007). Bibliographic databases are the main source of information used by many scientific studies; the validity of the results obtained will depend largely on the adequate selection and coverage of the study area (Norris and Oppenheim 2007). This fact makes WoS and Scopus the bases of our study, since both appear frequently as documentation sources in the scientific literature. Following the outline of similar studies, only articles published in scientific journals are analysed for the development of bibliometric indicators, since these are the main means of transmitting the results of an investigation (Maltrás-Barba 2003) and constitute a representative sample of the academic activity at international level (Benavides-Velasco et al. 2011). Thus, comments, conference reports, press articles, editorials, notes, letters or errata contained in WoS or Scopus are excluded. In order to delimit the results of the search to the field of Public Pension Systems, we opted to use the search equation modality, which has the advantage of enabling to reach journals classified within all thematic fields of knowledge resulting the search more comprehensive (Corral and Cànoves 2013). After debugging the documents not related to the study area, the ad hoc database (169 references in WoS and 219 in Scopus) was performed, on which the calculation of each of the variables necessary in obtaining bibliometric indicators was made.

1.3.1

Methodology of Calculations

There are two main procedures to perform overlap calculations: based on the primary sources that cover the secondary sources or using the documents (articles in our case) that the sources contain. On the one hand, in the first procedure we have the problem of the different indexing policies followed by each database; while some transfer all the sources, others do so in a more selective way (Pao 1993). On the other hand, the latter requires a greater effort when comparing databases. This chapter analyses the overlap between WoS and Scopus bases in the research area of Public Pension Systems following both procedures. (a) Meyer’s Index It is also called the relative index of singularity or peculiarity, which was developed by Meyer et al. (1983) and evaluates the follow-up that a database

1

Public Pension Systems: Bibliometric Study of Academic Publications in. . .

7

performs on a certain subject, interpreting the result as the degree to which a database covers that specialty (Pulgarín and Escalona 2007). In this indicator, single documents (or primary sources) contained in a single database are the ones with the highest weight, whose weight will be reduced progressively for duplicate documents, triplicate documents, etc., depending on the number of bases to be compared. The higher the value of the index, the greater the singularity of the database, that is, it will collect a greater number of documents or single sources (Costas et al. 2008). P Meyer’s Index ¼

Sources * Weight Total sources

(b) Traditional Overlap (TO) To measure the overlap percentage between two databases, or degree of similarity, traditional overlap (TO), defined by Gluck (1990), is used and the calculation is done using the following expression: %TO ¼ 100 *

jA \ Bj jjA [ Bj

The greater the TO, the greater the degree of similarity between the bases, that is, a coefficient of 0.3 shows a similarity of 30% or a difference of 70% between them, which would imply that when searching only one of the bases, we would find 70% of single sources. (c) Relative Overlap It was originally used by Bearman and Kunberger (1977). It measures the % of coverage of a database A, compared with another one, B. ⎛

⎞ ⎛ ⎞ jA \ Bj jA \ Bj %Overlap in B ¼ 100 * %Overlap in A ¼ 100 * jAj jBj The result is interpreted as the percentage of documents (or sources) that base A covers of base B.

1.4

Results

As we can see in Fig. 1.1, the scientific paper is the type of document mostly chosen by researchers when it comes to publicizing their work, 81% of cases in Scopus and 73% in WoS. Therefore, from this point the results obtained are based exclusively on the analysis of the selected articles.

8

J. Álvarez-García et al. 14

Other

WoS

7

Scopus

2 1

Editorial

46

Conference Paper

13

Book Chapter

0

Book

0

24 7 169

Article/Review

219

0

25

50

75

100

125

150

175

200

225

Fig. 1.1 Selection by type of documents in WoS and Scopus. (Source: Own elaboration) Cumulative Scopus

Cumulative WoS

Art. Scopus

Art. WoS

250

20

200

15

150

10

100

2015

2013

2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1984

1982

0 1979

0 1972

5 1959

50

Fig. 1.2 Evolution and cumulative growth of the number of articles published. (Source: Own elaboration)

1.4.1

Volume Indicators

As a result of the search for articles related to Public Pension Systems within the selected databases and time limit in 2015, a total of 169 articles were obtained in 115 journals for WoS and 219 articles in 152 journals, which form the ad hoc empirical base on which the bibliometric analysis is based. Figure 1.2 shows how the graphs of the production of both bases run parallel over the years, showing some proportionality in the number of articles collected. Cumulative growth reflects a similar evolution until 1997, when Scopus began to accumulate more papers than its competitor, a difference which increases with time. When organizing the annual distribution of the number of articles present in WoS compared to Scopus (Fig. 1.3), we verified the existence of a correlation between the annual production of both bases and their fit to a line of correlation coefficient equal to 0.88 (R2 ¼ 0.7782). From the set of selected articles, Population aging and the rising cost of public pensions (Bongaarts 2004) with 63 citations in Scopus and 46 in WoS and Retirement, pensions, and aging, Journal of Public Economics (Heijdra and Romp 2009) with 34 and 23 citations, respectively, stand out due to the number of citations received (Table 1.1). However, there are also articles with a large number of citations

1

Public Pension Systems: Bibliometric Study of Academic Publications in. . .

9

Fig. 1.3 Correlation between the number of articles published. (Source: Own elaboration)

Table 1.1 Ranking of articles by no. of citations Article Bongaarts, J. (2004). Population aging and the rising cost of public pensions. Population & Development Review, 30(1), 1–23 Beattie, R., & McGillivray, W. (1995). A risky strategy: Reflections on the World Bank Report Averting the old age crisis. International Social Security Review, 48(3–4), 5–22 Heijdra, B.J., & Romp, W.E. (2009). Retirement, pensions, and ageing. Journal of Public Economics, 93(3–4), 586–604 Brunner, J.K. (1996). Transition from a pay-asyou-go to a fully funded pension system: The case of differing individuals and intragenerational fairness. Journal of Public Economics, 60(1), 131–146 De Mesa, A.A., & Mesa-Lago, C. (2006). The structural pension reform in Chile: Effects, comparisons with other Latin American reforms, and lessons. Oxford Review of Economic Policy, 22(1), 149–167. Lynch, J., & Myrskylae, M. (2009). Always the third rail? Pension income and policy preferences in European democracies. Comparative Political Studies, 42(8), 1068–1097 Scholten, U., & Thum, M. (1996). Public pensions and immigration policy in a democracy. Public Choice, 87(3–4), 347–361 Green, D.A., & Riddell, W.C. (1993). The economic-effects of unemployment-insurance in Canada: An empirical-analysis of UI disentitlement. Journal of Labor Economics, 11(1), 96–147 Source: Own elaboration

Scopus Ranking 1

Citations 63

WoS Ranking 1

Citations 46

2

44

–

–

3

34

6

23

4

33

3

27

5

31

10

19

6

30

2

29

7

30

4

26

–

–

5

23

10

J. Álvarez-García et al.

that are only present in one database, such as A risky strategy: Reflections on the World Bank Report Averting the old age crisis (Beattie and McGillivray 1995) in Scopus (44) or The economic-effects of unemployment-insurance in Canada: An empirical analysis of UI disentitlement (Green and Riddell 1993) in WoS (23).

1.4.2

Overlap and Singularity

As we have seen, WoS identified 115 journals and 169 articles, compared to 152 and 219, respectively, of Scopus. The two databases analysed provided 256 different articles published in 177 journals. Of the total, 124 (48.44%) are single documents, collected in only one of the databases, and 132 (51.56%) are overlapping or shared by both (Fig. 1.4). The percentage of traditional overlap (%TO) of sources between WoS and Scopus (Gluck 1990) was 50.8%. ⎛ %TOsources ¼ 100 *

jWoS \ Scopusj jWoS [ Scopusj

⎞ ) %TOsources ¼ 100 *

90 25 þ 62 þ 90

) %TOsources ¼ 50:8% This result can be interpreted as that between WoS and Scopus; there is a 50.8% similarity or a 49.2% disparity in relation to primary sources on Public Pensions Systems. Regarding the articles, we find a %TO close to the sources percentage, % TOarticles ¼ 51.6%. To measure the coverage percentage of WoS over Scopus and vice versa, we use relative overlap (Bearman and Kunberger 1977). That is, Scopus covers 78% of WoS sources on Public Pension Systems. %TOsources Scopus ¼ 59%, 19% less compared to the WoS overlap.

Journals

WoS 25

90

Articles

Scopus 62

WoS 37

132

Fig. 1.4 Overlap data between WoS and Scopus. (Source: Own elaboration)

Scopus 87

1

Public Pension Systems: Bibliometric Study of Academic Publications in. . .

11

Table 1.2 Singularity of WoS and Scopus % Single documents Journals Articles 21.74% 21.89% 40.79% 39.73%

Databases WoS Scopus

Meyer’s index Journals 0.61 0.70

Articles 0.61 0.70

Source: Own elaboration Table 1.3 Lotka PI PI ≥1 0 < PI