Trust is an essential element of individuals' willingness to engage in economic activity such as investment. Because cultural institutions influence individuals' trust, I examine whether shocks to trust in a prominent cultural institution have crossover effects on households' investment decisions. I employ the U.S. Catholic clergy abuse scandal from 2002 to 2006 as a plausibly exogenous shock to the Catholic Church. Using survey data, I find that Catholic households decrease their equity participation by 3.3% to 5.9% upon revelation of local clergy misconduct in the news, consistent with an economically sizable opportunity cost. Evidence points to the influence of Catholicism on local social norms as the main channel.
{"title":"Do Cultural Institutions Affect Investor Trust? Evidence from the U.S. Catholic Clergy Abuse Scandal.","authors":"Quentin Dupont","doi":"10.2139/ssrn.3875648","DOIUrl":"https://doi.org/10.2139/ssrn.3875648","url":null,"abstract":"Trust is an essential element of individuals' willingness to engage in economic activity such as investment. Because cultural institutions influence individuals' trust, I examine whether shocks to trust in a prominent cultural institution have crossover effects on households' investment decisions. I employ the U.S. Catholic clergy abuse scandal from 2002 to 2006 as a plausibly exogenous shock to the Catholic Church. Using survey data, I find that Catholic households decrease their equity participation by 3.3% to 5.9% upon revelation of local clergy misconduct in the news, consistent with an economically sizable opportunity cost. Evidence points to the influence of Catholicism on local social norms as the main channel.","PeriodicalId":296706,"journal":{"name":"ERN: Economics of Networks & Institutional Change (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-06-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122599806","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper presents a methodology to identify agents who should be put into isolation to decelerate a diffusion process spreading through-out a network. We refer to this measure as to Diffusion Delay Centrality (DDC). We show that DDC assigns a high rank to agents acting as the gatekeepers of the fringe of the network. When these are isolated, the spreading of diffusion from the periphery to the core of the network (or vice versa) is prevented or, at least, decelerated. We also show that the ranking of nodes obtained from the DDC is predicted by standard measures of network centrality. Specifically, the ranking can be recovered using the difference in the values of betweenness and eigenvector centrality of network agents. We suggest that the findings presented in this paper might represent a useful tool for policies intending to reduce diffusion processes.
{"title":"Diffusion Delay Centrality: Decelerating Diffusion Processes Across Networks","authors":"Valerio Leone Sciabolazza, Luca Riccetti","doi":"10.2139/ssrn.3653030","DOIUrl":"https://doi.org/10.2139/ssrn.3653030","url":null,"abstract":"This paper presents a methodology to identify agents who should be put into isolation to decelerate a diffusion process spreading through-out a network. We refer to this measure as to Diffusion Delay Centrality (DDC). We show that DDC assigns a high rank to agents acting as the gatekeepers of the fringe of the network. When these are isolated, the spreading of diffusion from the periphery to the core of the network (or vice versa) is prevented or, at least, decelerated. We also show that the ranking of nodes obtained from the DDC is predicted by standard measures of network centrality. Specifically, the ranking can be recovered using the difference in the values of betweenness and eigenvector centrality of network agents. We suggest that the findings presented in this paper might represent a useful tool for policies intending to reduce diffusion processes.","PeriodicalId":296706,"journal":{"name":"ERN: Economics of Networks & Institutional Change (Topic)","volume":"4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-07-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122606432","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Franklin Allen, Giovanni Covi, Xian Gu, Oskar Kowalewski, Mattia Montagna
This study documents significant differences in the interbank market lending and borrowing levels across countries. We argue that the existing differences in interbank market usage can be explained by the trust of the market participants in the stability of the country’s banking sector and counterparties, proxied by the history of banking crises and failures. Specifically, banks originating from a country that has lower level of trust tend to have lower interbank borrowing. Using a proprietary dataset on bilateral exposures, we investigate the Euro Area interbank network and find the effect of trust relies on the network structure of interbank markets. Core banks acting as interbank intermediaries in the network are more significantly influenced by trust in obtaining interbank funding, while being more exposed in a community can mitigate the negative effect of low trust. Country-level institutional factors might partially substitute for the limited trust and enhance interbank activity. JEL Classification: G01, G21, G28, D85
{"title":"The Interbank Market Puzzle","authors":"Franklin Allen, Giovanni Covi, Xian Gu, Oskar Kowalewski, Mattia Montagna","doi":"10.2139/ssrn.3118363","DOIUrl":"https://doi.org/10.2139/ssrn.3118363","url":null,"abstract":"This study documents significant differences in the interbank market lending and borrowing levels across countries. We argue that the existing differences in interbank market usage can be explained by the trust of the market participants in the stability of the country’s banking sector and counterparties, proxied by the history of banking crises and failures. Specifically, banks originating from a country that has lower level of trust tend to have lower interbank borrowing. Using a proprietary dataset on bilateral exposures, we investigate the Euro Area interbank network and find the effect of trust relies on the network structure of interbank markets. Core banks acting as interbank intermediaries in the network are more significantly influenced by trust in obtaining interbank funding, while being more exposed in a community can mitigate the negative effect of low trust. Country-level institutional factors might partially substitute for the limited trust and enhance interbank activity. JEL Classification: G01, G21, G28, D85","PeriodicalId":296706,"journal":{"name":"ERN: Economics of Networks & Institutional Change (Topic)","volume":"244 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-12-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122494661","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Conventional wisdom on English development confers iconic status on the clause of the Act of Settlement (1701) that mandated secure tenure for judges. Because the Act's effect on tenure was partial, the effect of tenure on judicial decisions can be identified. The paper estimates how the awarding of tenure changed the number of citations to judges' decisions, a measure of judicial quality. The empirics uses two new databases, one on judges' biographies and one recording citations in the English Reports to earlier decisions. Several strategies aid identification. A court-year panel permits difference-in-differences. Controls capture judges' human capital and the importance of litigation. Instrumental-variable estimates use judge life-expectancy and political vicissitudes as instruments. Tenure has a strong, significant, and deleterious effect on the quality of associate-judge decisions. Tenure has no effect for chief judges. The Act of Settlement reduces citations by 20% in the 18th century. The results are interpretable in terms of the incentives provided by a powerful legal profession that could protect vulnerable judges in a politically volatile era.
关于英国发展的传统智慧赋予1701年《殖民地法》(Act of Settlement)中规定法官终身任职的条款以标志性的地位。由于该法对任期的影响是部分的，因此可以确定任期对司法判决的影响。这篇论文估计了任期的授予如何改变了法官判决的引用次数，这是衡量司法质量的一个指标。这项实证研究使用了两个新的数据库，一个是法官的传记，另一个记录了《英语报告》中对早期判决的引用。几种策略有助于识别。一个法庭年度小组允许差异中的差异。控制抓住了法官的人力资本和诉讼的重要性。工具变量估计使用预期寿命和政治变迁作为工具。终身制对助理法官的判决质量有着强烈的、显著的、有害的影响。终身制对首席法官没有影响。《和解法案》在18世纪减少了20%的引用。这样的结果是可以解释的，因为在一个政治动荡的时代，强大的法律职业提供的激励可以保护脆弱的法官。
{"title":"The Independence of Judges Reduced Legal Development in England, 1600-1800","authors":"Peter Murrell","doi":"10.2139/ssrn.3260739","DOIUrl":"https://doi.org/10.2139/ssrn.3260739","url":null,"abstract":"Conventional wisdom on English development confers iconic status on the clause of the Act of Settlement (1701) that mandated secure tenure for judges. Because the Act's effect on tenure was partial, the effect of tenure on judicial decisions can be identified. The paper estimates how the awarding of tenure changed the number of citations to judges' decisions, a measure of judicial quality. The empirics uses two new databases, one on judges' biographies and one recording citations in the English Reports to earlier decisions. Several strategies aid identification. A court-year panel permits difference-in-differences. Controls capture judges' human capital and the importance of litigation. Instrumental-variable estimates use judge life-expectancy and political vicissitudes as instruments. Tenure has a strong, significant, and deleterious effect on the quality of associate-judge decisions. Tenure has no effect for chief judges. The Act of Settlement reduces citations by 20% in the 18th century. The results are interpretable in terms of the incentives provided by a powerful legal profession that could protect vulnerable judges in a politically volatile era.","PeriodicalId":296706,"journal":{"name":"ERN: Economics of Networks & Institutional Change (Topic)","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-10-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128466956","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Twenty years of debate regarding the restructuring of the Chinese freight railway have failed to yield a consensus. Early policy statements favoring the creation of above-the-rail competition over a monopoly infrastructure – the “European” model of rail restructuring – have broadened into a lively policy and scholarly debate that includes as an alternative the division of the system into competing vertically integrated railways – the “Americas” model of restructuring. To date, however, there have been no tangible reform steps beyond organizational restructuring, the construction of new coal railroads, some with private-sector participation, and the introduction of scheduled service, especially for containers, between China and Europe. In this paper we argue in favor of the Americas model as a basis for restructuring and offer two alternative scenarios for the creation of multiple vertically integrated freight railways. Both plans enable competition between independent firms and routes for import/export traffic, one a southern, One Belt/One Road path, the other a northern path via the Trans-Siberian Railway.
{"title":"Restructuring the Chinese Freight Railway: Two Scenarios","authors":"Shana Cui, R. Pittman, Jian Zhao","doi":"10.2139/ssrn.3229378","DOIUrl":"https://doi.org/10.2139/ssrn.3229378","url":null,"abstract":"Twenty years of debate regarding the restructuring of the Chinese freight railway have failed to yield a consensus. Early policy statements favoring the creation of above-the-rail competition over a monopoly infrastructure – the “European” model of rail restructuring – have broadened into a lively policy and scholarly debate that includes as an alternative the division of the system into competing vertically integrated railways – the “Americas” model of restructuring. To date, however, there have been no tangible reform steps beyond organizational restructuring, the construction of new coal railroads, some with private-sector participation, and the introduction of scheduled service, especially for containers, between China and Europe. In this paper we argue in favor of the Americas model as a basis for restructuring and offer two alternative scenarios for the creation of multiple vertically integrated freight railways. Both plans enable competition between independent firms and routes for import/export traffic, one a southern, One Belt/One Road path, the other a northern path via the Trans-Siberian Railway.","PeriodicalId":296706,"journal":{"name":"ERN: Economics of Networks & Institutional Change (Topic)","volume":"67 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-06-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127073111","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Russian Abstract: Представлен анализ системы балансовых уравнений для потоковых параметров производственной линии. Исследован класс решений системы балансовых уравнений для параметров производственной линии, представленный равновесными функциями. При рассмотрении неравновесных состояний параметров поточной линии использованы приближенные методы, основанные на теории возмущений. Продемонстрирован вывод уравнений системной динамики для сети материалов производственной линии, в основу которого положены балансовые уравнения. Показано, что уравнения системной динамики определяются в результате интегрирования системы балансовых уравнений. Проанализирован метод построения уравнений системной динамики для сети материалов. English Abstract: The analysis of the system of balance equations for the flow parameters of the production line is presented. The class of solutions of the system of balance equations for the parameters of the production line, represented by equilibrium functions, is investigated. Approximate methods based on perturbation theory were used to consider nonequilibrium states of flow line parameters. The derivation of equations of system dynamics for a network of materials of a production line based on balance equations is demonstrated. It is shown that the equations of system dynamics are determined as a result of integrating the system of balance equations. The method of constructing the equations of system dynamics for a network of materials is analyzed.
{"title":"Многомоментные потоковые модели производственной линии (Multi-Movements Flow Model Production Line)","authors":"O. Pihnastyi","doi":"10.2139/ssrn.3249782","DOIUrl":"https://doi.org/10.2139/ssrn.3249782","url":null,"abstract":"<b>Russian Abstract:</b> Представлен анализ системы балансовых уравнений для потоковых параметров производственной линии. Исследован класс решений системы балансовых уравнений для параметров производственной линии, представленный равновесными функциями. При рассмотрении неравновесных состояний параметров поточной линии использованы приближенные методы, основанные на теории возмущений. Продемонстрирован вывод уравнений системной динамики для сети материалов производственной линии, в основу которого положены балансовые уравнения. Показано, что уравнения системной динамики определяются в результате интегрирования системы балансовых уравнений. Проанализирован метод построения уравнений системной динамики для сети материалов. <b>English Abstract:</b> The analysis of the system of balance equations for the flow parameters of the production line is presented. The class of solutions of the system of balance equations for the parameters of the production line, represented by equilibrium functions, is investigated. Approximate methods based on perturbation theory were used to consider nonequilibrium states of flow line parameters. The derivation of equations of system dynamics for a network of materials of a production line based on balance equations is demonstrated. It is shown that the equations of system dynamics are determined as a result of integrating the system of balance equations. The method of constructing the equations of system dynamics for a network of materials is analyzed.","PeriodicalId":296706,"journal":{"name":"ERN: Economics of Networks & Institutional Change (Topic)","volume":"30 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121289646","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The South Caucasus states are engaged in a complex and contradictory process of simultaneous regional integration and disintegration. The main instrument of regional integration could be a network of bilateral Free Trade Agreements (FTA) which those countries have signed and adopted. As is well known, trade integration within a free trade area can also lead to trade diversion which may lead to a loss of tariff revenues although this should be less of a problem in the case of a low external tariff towards third countries.
{"title":"The Necessity to Improve the Logistic Processes of the Transport System","authors":"K. Goletiani","doi":"10.2139/SSRN.3028595","DOIUrl":"https://doi.org/10.2139/SSRN.3028595","url":null,"abstract":"The South Caucasus states are engaged in a complex and contradictory process of simultaneous regional integration and disintegration. The main instrument of regional integration could be a network of bilateral Free Trade Agreements (FTA) which those countries have signed and adopted. As is well known, trade integration within a free trade area can also lead to trade diversion which may lead to a loss of tariff revenues although this should be less of a problem in the case of a low external tariff towards third countries.","PeriodicalId":296706,"journal":{"name":"ERN: Economics of Networks & Institutional Change (Topic)","volume":"10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-08-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122270748","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Last decades, digital processes caused the transformation of society, business, and government. It has become not only a part of economic integration, but it has also performed as a digital economy. Today, the digital economy is characterized by a high growth, innovative development, and wide utilization in the different sectors of economy. Digital economy includes markets based on digital technologies, which facilitates the trade of goods and services through e-commerce. The key factor of the economic growth is the development of digital sector. The article discusses an ecosystem of the digital economy, evaluates a range of the digital economy, analyses an actual foundation and components of the digital economy. The research demonstrates the influence of the digital technologies on the society's life, and citizens' digital activity. The article presents the digital environment of Georgia, innovation activities of households and enterprises in the digital environment. Concrete measures to be taken are suggested as a conclusion.
{"title":"Ecosystem of Digital Economy in Georgia","authors":"Rati Abuladze, Iza Gigauri","doi":"10.2139/ssrn.2958038","DOIUrl":"https://doi.org/10.2139/ssrn.2958038","url":null,"abstract":"Last decades, digital processes caused the transformation of society, business, and government. It has become not only a part of economic integration, but it has also performed as a digital economy. Today, the digital economy is characterized by a high growth, innovative development, and wide utilization in the different sectors of economy. Digital economy includes markets based on digital technologies, which facilitates the trade of goods and services through e-commerce. The key factor of the economic growth is the development of digital sector. \u0000The article discusses an ecosystem of the digital economy, evaluates a range of the digital economy, analyses an actual foundation and components of the digital economy. \u0000The research demonstrates the influence of the digital technologies on the society's life, and citizens' digital activity. \u0000The article presents the digital environment of Georgia, innovation activities of households and enterprises in the digital environment. \u0000Concrete measures to be taken are suggested as a conclusion.","PeriodicalId":296706,"journal":{"name":"ERN: Economics of Networks & Institutional Change (Topic)","volume":"10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-04-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129884614","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Our study object is the Russian Internet economy, i.e. economic activities of companies relying on the Russian-language segment of the World Wide Web. The purpose of this study is to classify businesses engaged in the national Internet economy and measure its size (as a share of GDP) using official statistics. The analysis of international approaches used for such studies allowed us to classify these according to the following criteria: the direct impact of the Internet on the economy, indirect economic impact of the Internet, and its indirect impact on the social sphere. To assess the size of the Russian Internet economy we used the approaches applied by international organizations (OECD, BCG, McKinsey) for the analysis of the direct impact of the Internet on the economy [BCG (2014), McKinsey (2011), OECD (2014), etc.]. The authors singled out three sectors within the Internet economy: the sector of ICT infrastructure and its maintenance; the sector of companies doing business purely on the Internet, and the sector of companies combining an online and offline business. To assess the share of the Internet economy in GDP using the production approach we first defined the above sectors in accordance with All-Russian Classification of Economic Activities (OKVED) Rev. 1.1 and subsequently calculated gross value added (GVA) for each sector. For this purpose, the GVA data calculated by Federal Service of State Statistics (Rosstat) was disaggregated while the share of the GVA contributed by the third sector companies (i.e. combining an online and offline business) was assessed using the results of special surveys and Rosstat data. To measure the size of the Internet economy using the expenditure approach we focused on consumer spending on goods bought through the Internet, ICT equipment and Internet access as well as institutions’ expenditure for ICT equipment, fixed capital investment of enterprises engaged in Internet activities, public sector ICT spending, net exports of ICT goods and services. According to our estimates obtained by two methods such as the production approach and expenditure approach, the share of the Internet economy in GDP in 2014 amounted to 2.7 and 2.6%, respectively. Future studies would require a more detailed definition and description of the Internet-related economic activities on the basis of OKVED2 with subsequent calculation of GVA for appropriate companies as well as development of statistical tools for collecting data on household spending
{"title":"Approaches to Defining and Measuring Russia’s Internet Economy","authors":"G. Abdrakhmanova, Galina Kovaleva, S. Plaksin","doi":"10.2139/ssrn.2789532","DOIUrl":"https://doi.org/10.2139/ssrn.2789532","url":null,"abstract":"Our study object is the Russian Internet economy, i.e. economic activities of companies relying on the Russian-language segment of the World Wide Web. The purpose of this study is to classify businesses engaged in the national Internet economy and measure its size (as a share of GDP) using official statistics. The analysis of international approaches used for such studies allowed us to classify these according to the following criteria: the direct impact of the Internet on the economy, indirect economic impact of the Internet, and its indirect impact on the social sphere. To assess the size of the Russian Internet economy we used the approaches applied by international organizations (OECD, BCG, McKinsey) for the analysis of the direct impact of the Internet on the economy [BCG (2014), McKinsey (2011), OECD (2014), etc.]. The authors singled out three sectors within the Internet economy: the sector of ICT infrastructure and its maintenance; the sector of companies doing business purely on the Internet, and the sector of companies combining an online and offline business. To assess the share of the Internet economy in GDP using the production approach we first defined the above sectors in accordance with All-Russian Classification of Economic Activities (OKVED) Rev. 1.1 and subsequently calculated gross value added (GVA) for each sector. For this purpose, the GVA data calculated by Federal Service of State Statistics (Rosstat) was disaggregated while the share of the GVA contributed by the third sector companies (i.e. combining an online and offline business) was assessed using the results of special surveys and Rosstat data. To measure the size of the Internet economy using the expenditure approach we focused on consumer spending on goods bought through the Internet, ICT equipment and Internet access as well as institutions’ expenditure for ICT equipment, fixed capital investment of enterprises engaged in Internet activities, public sector ICT spending, net exports of ICT goods and services. According to our estimates obtained by two methods such as the production approach and expenditure approach, the share of the Internet economy in GDP in 2014 amounted to 2.7 and 2.6%, respectively. Future studies would require a more detailed definition and description of the Internet-related economic activities on the basis of OKVED2 with subsequent calculation of GVA for appropriate companies as well as development of statistical tools for collecting data on household spending","PeriodicalId":296706,"journal":{"name":"ERN: Economics of Networks & Institutional Change (Topic)","volume":"89 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-06-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124151605","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Population ageing requires adjustments to the traditional way of providing pensions though pay-as-you-go (PAYG) systems. Governments should prepare sound frameworks for a sustainable long-term shift towards private pensions, either in the form of second or third pillar or even better both of them. Namely, under demographic dynamics being driven by low fertility and increasing longevity both deteriorating the population's dependency ratio, private pension systems are more efficient than traditional PAYG. This paper makes two main points. First one is relatively straightforward. Fiscal limitations under current and projected demographic dynamics will dramatically reduce PAYG pensions. Without saving sufficient amounts during the active period, individuals will be increasingly ending up in poverty. Their savings will not be enough to support their desired old age consumption. Second point, highlights an impact of the asset allocation decision and related lacking awareness of general public regarding this issue. Under the assumption that people are literate enough and they save for their pensions, they might suffer opportunity losses because of the ignorance of appropriate allocation of their savings to various asset classes. Namely, we show in this paper there is a huge difference in outcomes under alternative asset allocation decisions. Those differences represent shortfalls in pension wealth. Therefore, we argue that both illiteracy about required saving on one hand and ignorance about the appropriate asset class decision on the other will play crucial role in determining well-being of masses in the not so distant future if the points we make in this paper are not taken to knowledge.
{"title":"Welfare Loss by the Financially Illiterate and Ignorant: Value of Private Pension Savings and Allocation","authors":"Ales Berk, Mitja Cok, Marko Košak, Jože Sambt","doi":"10.2139/ssrn.1928539","DOIUrl":"https://doi.org/10.2139/ssrn.1928539","url":null,"abstract":"Population ageing requires adjustments to the traditional way of providing pensions though pay-as-you-go (PAYG) systems. Governments should prepare sound frameworks for a sustainable long-term shift towards private pensions, either in the form of second or third pillar or even better both of them. Namely, under demographic dynamics being driven by low fertility and increasing longevity both deteriorating the population's dependency ratio, private pension systems are more efficient than traditional PAYG. This paper makes two main points. First one is relatively straightforward. Fiscal limitations under current and projected demographic dynamics will dramatically reduce PAYG pensions. Without saving sufficient amounts during the active period, individuals will be increasingly ending up in poverty. Their savings will not be enough to support their desired old age consumption. Second point, highlights an impact of the asset allocation decision and related lacking awareness of general public regarding this issue. Under the assumption that people are literate enough and they save for their pensions, they might suffer opportunity losses because of the ignorance of appropriate allocation of their savings to various asset classes. Namely, we show in this paper there is a huge difference in outcomes under alternative asset allocation decisions. Those differences represent shortfalls in pension wealth. Therefore, we argue that both illiteracy about required saving on one hand and ignorance about the appropriate asset class decision on the other will play crucial role in determining well-being of masses in the not so distant future if the points we make in this paper are not taken to knowledge.","PeriodicalId":296706,"journal":{"name":"ERN: Economics of Networks & Institutional Change (Topic)","volume":"43 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-09-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114911531","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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