The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Pension Systems: Principles, Debates and Analytical Errors

  • Nicholas Barr
Reference work entry


Many countries face problems financing pensions in the face of population aging. There is controversy about the underlying economic theory, the extent of the problem and the best mix of policies to protect old-age security. This article sets out the economic analytics of pensions, discussing in turn their multidimensional nature, principles of analysis, the reasons why government gets involved, and debates and analytical errors. Those analytical errors matter, because they lead to policy errors. A central conclusion is that although there are sound principles of pension design, there is no single best pension system for all countries.


Consumption smoothing Defined-benefit Defined-contribution Funding Insurance Notional defined-contribution Pay-as-you-go Pensions Risk sharing 

JEL Classification

H10 H30 H31 H55 
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  5. World Bank. 2006. Pension reform and the development of pension systems: An evaluation of World Bank assistance. Washington, DC: Independent Evaluation Group, World Bank.$file/pensions_evaluation.pdf.

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Nicholas Barr
    • 1
  1. 1.