Reforming Pensions: Principles and Policy Choices

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Reforming Pensions: Principles and Policy Choices
By Nicholas Barr and Peter Diamond
Oxford University Press, 2008
368 pp. $49.95
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The creation or reform of pensions is under discussion almost everywhere. Growing urbanization and rising incomes in poor countries, along with increasing longevity, have raised concerns about sustenance in old age. In the developed world, increasing longevity and declining birthrates have made most existing pension systems financially unsustainable. This book, a transatlantic collaboration between two leading economists, offers a comprehensive analysis of the objectives of pensions and of their influence on family choices, particularly regarding work, leisure, and retirement. It also includes an examination of many existing pension systems, illustrating both the wide variety among them and their differing degrees of effectiveness. The authors conclude that the diversity of pension schemes properly reflects both the differences in their objectives and the differences in their administrative capabilities; no one scheme fits all countries. At the same time, pension systems can perform well or badly, given their objectives and capabilities. Useful, although only general, guidance is given to all, with a more detailed discussion of the pension systems in Chile and China. The book offers an excellent overview of the complexities of designing effective pension systems. It fails to discuss, however, the implications for national pensions of immigration, which is already high and likely to rise in the future.