How Generous Are Contemporary Pension Systems? A Comparative Study of the European Countries

Abstract

As a result of deteriorating demographics and associated fiscal problems, many European countries face reforms that are believed to reduce pension system generosity. However, despite the fact that generosity is a term that is very often used in reference to the social policy outcomes, the current literature does not define it precisely, relying instead on its intuitive meaning. The paper aims at identifying and discussing different approaches to the concept of pension system generosity as seen from the microeconomic and macroeconomic perspective. It also attempts to evaluate and compare the generosity of pension systems in the European countries. The empirical research covers aggregated data for 27 states and employs selected indicators of pension system generosity associated with its identified dimensions. Statistical correlation analysis is also used to compare the convergence of the results of the generosity assessment from different perspectives. Consequently, this paper presents and collates several rankings of the studied countries in terms of the generosity of their pension systems. The main finding of the study is that the concept of pension system generosity is multidimensional and the perspective chosen affects the results of the assessment.