Public Pension Expenditure in the New EU Member States: A Panel Data Approach

Sustainability and stability of public pension systems based on the pay-as-you-go social security scheme have been challenged by the aging societies of industrial economies. This paper concentrates on pension systems of eleven post-socialist economies referred to as the New Member States of the European Union that share a similar history of adaptations to a market economy and establishment of multi-pillar pension systems. Due to similar demographic and economic challenges, their pension systems are facing, and the corresponding pension reforms aimed at enhancing their pension systems' sustainability, we empirically test for the convergence of public pension expenditure to GDP among these economies in the period between 1995 and 2017. At the same time, the impact of various macroeconomic, demographic, and institutional variables on public pension expenditure to GDP is empirically estimated. The results provide evidence of convergence in terms of public pension expenditure to GDP among the New Member States of the European Union, while also revealing the fiscal burden that population aging represents for the analyzed pension systems.