FRAMEWORK FOR THE ANALYSIS OF PENSION AND UNEMPLOYMENT BENEFIT REFORMIN POLAND

Pension reform in Poland is an urgent priority. Benefit expenditures h ave placed considerable pressure on public finances, hampering stabili zation efforts. Demographic developments will exacerbate this pressure although probably less than some estimates have suggested. The main l ong-term argument for reform is that the current system induces severe micro-economic distortions. To analyze possible reforms, this paper e mploys a simulation model of a utility-maximizing household facing the detailed rules of the current Polish pension system. The reforms cons idered are designed to reduce the dead-weight losses associated with c urrent arrangements and to alleviate the inequality engendered by the present system.