On the Validity and the Consequences of the World Bank Pension Data on Policy Making in Eastern Europe

Abstract

A number of World Bank studies have been presenting inconsistent and contradictory data on the performance of mandatory private second pillar pension funds in Eastern Europe. This paper shows that the World Bank data is upwardly biased and tangibly overstates the true second pillar performance. The consequences are significant enough to undermine a credible policy analysis, especially an assessment of the recent reform reversals. This paper argues that the disappointing second pillar performance makes it possible for reform reversals in some countries to improve the short-term fiscal position without necessarily deteriorating the long-term pension sustainability. The recent reform reversal trend thus deserves a more elaborate research in order to establish firm basis for making adequate policy recommendations. Since the World Bank is one of the leading sources of information on international pension policies, an improvement of its disclosure standards is necessary in order to prevent similar dubious data issues from reoccurring in the future.