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Pension reform improves long-term fiscal sustainability in Russia

Macroeconomics research
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What the study found

The study found that Russia’s 2018 pension reform, which raised the statutory retirement age, is associated with a short-run drop in consumption but stronger long-term growth in output, investment, government spending, and exports. The authors also report improved fiscal sustainability, including a lower required budget-balancing VAT rate and a smaller pension fund deficit.

Why the authors say this matters

The authors conclude that the findings highlight the importance of structural reforms for long-term macroeconomic stability. They also say the results show that demographics and external shocks, such as oil prices, play a critical role in pension system performance.

What the researchers tested

The researchers developed a dynamic overlapping generations general equilibrium model for the Russian economy. An overlapping generations model is a type of economic model that tracks different age groups over time. They used demographic projections, variable labor supply responses, and exogenous oil price scenarios to compare post-reform outcomes with baseline scenarios without the reform.

What worked and what didn't

Raising the retirement age moderately reduced consumption in the short run, but it was linked to more robust long-term growth in output, investment, government spending, and exports. The reform improved fiscal sustainability by lowering the required VAT rate and the pension fund deficit, with stronger effects under adverse demographic conditions or low oil prices. The fiscal effect was muted in optimistic demographic scenarios with strong labor force growth, but remained significant when population aging intensified fiscal pressure.

What to keep in mind

The abstract does not describe detailed model limitations beyond the scenarios examined. The findings are based on model-based comparisons of reform and no-reform trajectories, not on direct observation of future outcomes.

Key points

  • The study modeled Russia’s 2018 pension reform, which raised the statutory retirement age.
  • It found a moderate short-run decline in consumption after the reform.
  • Long-term output, investment, government spending, and exports were projected to grow more strongly.
  • The reform lowered the required budget-balancing VAT rate and the pension fund deficit.
  • Fiscal benefits were larger under adverse demographic conditions or low oil prices.
  • The fiscal effect was weaker in optimistic demographic scenarios with strong labor force growth.

Disclosure

Research title:
Pension reform improves long-term fiscal sustainability in Russia
Authors:
Angelina E. Shpilevaya, Mikhail Y. Gareev, Kristina Nesterova, Andrey V. Polbin
Institutions:
Central Bank of the Russian Federation, Financial University, Gaidar Institute for Economic Policy, Gaidar Institute for Economic Policy, The Russian Presidential Academy of National Economy and Public Administration, The Russian Presidential Academy of National Economy and Public Administration, The Russian Presidential Academy of National Economy and Public Administration
Publication date:
2026-06-30
DOI:
10.32609/j.ruje.12.118859
OpenAlex record:
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Image credit:
Emklis, Wikimedia Commons, CC0
AI provenance: This post was generated by gpt-5.4-mini (OpenAI). The original authors did not write or review this post.

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