1. A new proposal of pension regimes typology: Empirical analysis of the OECD countries
Edyta Marcinkiewicz, Filip Chybalski,
Lodz University of Technology, Department of Management
This paper forms part of the project funded by the National Science Centre (Poland) under grant number DEC-2013/09/B/HS4/01516
ENRSP Conference, Sopot 2016

2. Agenda: Goal Motivation Conceptual framework Method and data Results
Conclusion
Main limitation

3. Goal
To propose a new pension regimes typology based on two main criteria: (1) the relation between state and market in the pension system, and (2) the share of voluntary and mandatory schemes.
Justification: We believe that these two dimensions represent the foundation of the structure of pension systems and allow for analysis of their evolution as well as their assessment in terms of pension system objectives - adequacy and efficiency. Such an approach is quite different than e.g. by Esping-Andersen (1990), Rhodes & Natali (2003), Borsch-Supan (2007), Soede & Vrooman (2008).

4. Motivation
Countries facing pension reforms have to answer the question: Are there any differences between the various pension system models in terms of such objectives as adequacy or efficiency?
A typology that may be useful for shaping pension policy should disregard the outputs and performance of a pension system and refer only to the features characterizing the model (construction) of the system.

5. Conceptual framework (1):
We treat a pension system as a system in which some inputs (mainly pension expenditures) are transformed into outputs (pension benefits) which as results of a pension system functioning are assessed according to two main criteria: adequacy and efficiency.

6. Conceptual framework (2):
When developing a typology of pension regimes we assume that the theory should explain the actual status and should not deviate from reality. The division into regimes which is only a theoretical construct has very limited practical application. Studying ideal or pure models have some explanatory value, however, it does not allow for the performance assessment.

7. Conceptual framework (3):
Classification of pension systems into separate pension regimes should be based solely on the features distinguishing between their constructions, but not on the criteria for the assessment of systems. Such an approach would be pointless. This results from the obvious assumption that the model of a pension system influences its performance, not vice versa.

8. Theory – initial conclusion
Four theoretical pension regimes:
mandatory public (mandatory scheme administered by public sector),
mandatory private (mandatory scheme administered by private sector),
voluntary public (voluntary scheme administered by public sector), rather rarely functioning,
voluntary private (voluntary scheme administered by private sector).

9. Method and data (1)
Hierarchical clustering and k-means clustering supported by Pearson’s correlation coefficient allowes identification of empirical pension regimes.
The comparison of statistical parameters (means and medians) across pension regimes allowes us to compare identified 3 empirical pension regimes (to examine whether they differ as expected).
Data: OECD pension statistics ( ).

10. Method and data (2)
Differentiating variables: X1-X3: expresses the share of a given type of expenditure (from mandatory public, mandatory private, or voluntary schemes) in total pension expenditure, X4-X6: expresses the contribution of a given part of pension system to the retirement income (predictions), X7-X8: coverage rates for mandatory and voluntary schemes, X9: the rate of public mandatory pension contribution, X10-X12: the share of: public minimum, public ER or DC, or private provision in the whole retirement income package (predictions). Green – refers to today’s beneficiaries Red – refers to today’s contributors

11. Results (1):

12. Results (2): final groups after correction (k-means and Pearson’s correlation)
I – regime of significant voluntary schemes
II – regime of significant mandatory participation in private schemes
III – mandatory public regime

13. Results (3):
I regime: Canada, Ireland, Czech Rep., New Zealand, United Kingdom, and United States
II regime: Australia, Denmark, Estonia, Iceland, Israel, Netherlands, Poland, Slovak Rep., Sweden
III regime: Austria, Belgium, Finland, France, Germany, Greece, Hungary, Italy, Luxembourg, Portugal, Slovenia, Spain, and Turkey

14. Conclusion:
Our typology does not fail empirical verification since the results of clustering generally confirm the theoretical typology we proposed: I regime is similar to the voluntary private regime, II regime to the mandatory private regime, whereas III regime to the mandatory public one. However, this is only the similarity between theoretical and empirical regimes, not the equivalence.

15. Main limitation:
In most of the countries the generation of pensioners is diversified in terms of the design of pension system they participate in. In fact, they are participants of various pension systems, as their contributions and benefits are determined by different pension system rules. The same applies to the working generation. This causes obvious statistical problems in cross-country studies. However, nowadays the majority of pension systems may be perceived as consisting of two or even more “subsystems” since different cohorts may pay contributions or receive benefits on the basis of different rules which result from the pension reforms. Moreover, a given cohort may participate in different pension “subsystems”

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