Ciani, Delavande, Etheridge & Francesconi: Policy Uncertainty about State Pension Reform


This paper estimates the effect of uncertainty about pension reform in Europe both before and after the financial crisis. Using data on subjective beliefs from SHARE, we provide evidence of considerable uncertainty about the future path of pension provision. This uncertainty exists along multiple dimensions — such as the generosity of benefits and changes to pensionable age — and beliefs about future reforms are highly heterogeneous. To assess the effects of this uncertainty we estimate a rich life-cycle model of saving, labour supply and pension wealth accumulation. A new and important contribution is that the model allows for the evolution of subjective beliefs. We find that, across the whole population, the different types of uncertainty have moderate effects, even during (or after) the financial crisis, and even allowing for high levels of risk aversion. Some subgroups of the population, however, face higher welfare costs of uncertainty, particularly those approaching retirement in unemployment. Conversely, for those in work, pension uncertainty is overshadowed by (current) income uncertainty and is reduced by flexibility about retirement choice. We show that, within different types of reform, uncertainty about benefit generosity is more costly than uncertainty about pensionable age. Finally, we assess the consequences of belief heterogeneity.


Available for download here.

Zhan: International Investment Rule-making – Trends, Challenges and Way Forward,

From the chapter:

In the absence of a multilateral investment system, the current international investment regime is multi-layered and multi-faceted, consisting of close to 3,270 investment treaties at the bilateral, regional and plurilateral level (by the end of 2014). The overwhelming majority of countries are party to at least one international investment agreement (IIA). Some have even signed more than 100 such agreements.

On the one hand, we see an up-scaling of treaty making in two respects: First, in terms of participation, up-scaling means that more and more countries are actively engaged in negotiating IIAs. For example, 44 IIAs were concluded in 2013; and 88 countries are currently involved in negotiating seven mega-regional agreements with investment chapters. The EU alone is engaged in negotiating more than 20 agreements that are expected to include investment-related provisions (which may vary in their scope and depth).

Second, up-scaling occurs with regard to the substance of agreements. They become broader in the coverage of issues (i.e. they expand existing treaty elements and include new ones) and they introduce more sophisticated treaty standards.

On the other hand, some countries are disengaging from the IIA regime. Over the past two years, some countries have unilaterally terminated existing treaties (e.g. Ecuador, South Africa and Indonesia), and some also denounced multilateral investment arbitration conventions (e.g. Bolivia, Ecuador and Venezuela).

In addition, there is a continued trend of re-adjusting treaty negotiating positions. At least 40 countries and four regional integration organisations have been recently reviewing and revising their model investment agreements and negotiation strategies, partially through a multi-stakeholder approach.


Available for download here.


Gale, Holmes & John: Public Pensions in Flux – Can the Federal Government’s Experiences Inform State Responses?

From the Introduction:

In many policy-related situations, the states can be useful laboratories to determine the most appropriate federal actions. Variations across states in health care programs, earned income credit rules, minimum wages, and other policies have helped inform debates about federal interventions.

In this paper, we reverse that approach. Many state and local governments currently face difficulties financing future pension obligations for their workers. The federal government, however, faced similar circumstances in the 1980s and successfully implemented a substantial reform. We examine the situation the federal government faced and how it responded to the funding challenge. We present key aspects of the situation facing state governments currently and draw comparisons between them and the federal situation in the 1980s. Our overarching conclusion is that states experiencing distress today about the cost and funding of its pension plans could benefit from following an approach similar to the federal government’s resolution of its pension problems in the 1980s.



Available for download here.


Anthopoulos, Pitelis & Liakou: The Nature, Performance and Economic Impact of Sovereign Wealth Funds


We analyse the nature and economic performance of sovereign wealth funds (SWFs). Following a historical excursion, we discuss extant views on the nature, performance, economic impact and regulation of SWFs. Following these we pinpoint some limitations and outline some elements of a political economy-based conceptual framework, required for a more comprehensive appreciation of the issue.

And more from the conclusion:

SWFs are part and parcel of a country’s developmental industrial policies (DIPs) as well as its approach to inter-national integration and international trade and investment policies (ITIPs) and supra-national governance. However these issues have not been integrated, often not even raised, in the SWFs literature. A major characteristic of DIPs and ITIPs refers is that they can be diametrically opposed between nations and in terms of underlying economic theory (Pitelis, 2014). It is important to place SWFs within a framework of sustainable global value creation, and assess their implications and the requisite regulatory policies in its context. This is beyond the scope of this deliverable. The issue is pursued in WP6 that discusses issues of supra-national governance and the opportunities for Europe to benefit by aligning the legitimate interests of SWFs with its own interests.

Available for download here.


Claassen, Kabundi & Loots: Decoupling between China and Advanced Economies


In the past twenty years, China has made impressive strides at transforming its economy. From a starting point of low economic growth and high poverty levels to average GDP growth rates of ten per cent a year, China has over the past decade taken centre stage in the global economy and is considered by analysts such as Subramanian (2011) to be an “inevitable superpower”. As that power has been called into question with a hard landing looming on the horizon, ever more attention is paid to the role that China plays in the global economy.

Since the economic policies in China are embedded in a centralised decision model, the question is to what extent its business cycle is in tandem with the world business cycle, which is advertently shaped by the advanced economies’ business cycles. The increased participation and perceived dominance of China in the world economy lead to the question to what extent the Chinese economy and per definition its business cycle has become integrated with that of advanced economies. Does the Chinese business cycle comove with advanced countries’ business cycles? This question gained particular attention especially around the time of the 2008 credit crunch. What had started as an advanced crisis soon became global, and the response from and impact on emerging markets in general and China in particular were under the spotlight. The notion took hold that some emerging economies had decoupled from the business cycle of advanced economies during and immediately after the crisis. Within this debate, China, as a very large emerging market, warrants special attention.


Available for download here.