"The article explores the initial macro-financial performance of partial pension system “privatizations”— involving privately-managed individual retirement savings accounts (IRAs) — undertaken in many emerging European countries. Using empirical data for a period of close to a decade, the evidence shows that returns on privately-managed IRAs have been below the implicit rate of return of public pay-as-you-go (PAYG) systems. High operating costs and undeveloped capital markets are identified as major contributing factors to the failure of privately-managed IRAs to meet reform expectations. In light of empirical evidence, Serbia is advised to focus on parametric PAYG reforms and to avoid reforms that involve the partial “privatization” of the pension system."

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