Open AccessEfficient Indexation of Social Insurance Pensions
Author(s) -
Algirdas Bartkus
Publication year - 2010
Publication title -
lithuanian journal of statistics
Language(s) - English
Resource type - Journals
ISSN - 2029-7262
DOI - 10.15388/ljs.2010.13945
Subject(s) - indexation , economics , consumption (sociology) , earnings , wage , pension , point (geometry) , social security , labour economics , monetary economics , monetary policy , accounting , finance , market economy , social science , geometry , mathematics , sociology
This paper tries to formulate conclusions about the indexation of old-age pensions. Pensions can be adjusted and indexed taking into consideration a wage increase. The point of indexation with regard to wages lies in the increment of pensions on to a new, higher nominal level of consumption opportunities (the pension increases), but leaving it at the same relative or potential level of consumption opportunities (the pensions-to-earnings ratio remains constant). Pensions can also be adjusted and indexed according to an increase in the price level. The adjustment of pensions with respect to the price level maintains the real level of consumption (a person is always able to buy the same set of goods). The aim of this study is to identify the conditions of efficient indexation; to summarize the methods of indexation; to draw conclusions as to which of these methods maximizes the wealth of taxpayers.