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Choice Architecture and the Pension System in the Czech Republic
Název práce v češtině: Architektura Výběru a Penzijní Systém v České Republice
Název v anglickém jazyce: Choice Architecture and the Pension System in the Czech Republic
Klíčová slova: Česká důchodová reforma, behaviorální ekonomie, Švédský důchodový systém, architektura výběru, důchodový věk, fiskální tlaky
Klíčová slova anglicky: Czech pension reform, behavioral economics, Swedish pension system, choice architecture, retirement age, fiscal pressures
Akademický rok vypsání: 2016/2017
Typ práce: bakalářská práce
Jazyk práce: angličtina
Ústav: Institut ekonomických studií (23-IES)
Vedoucí / školitel: Mgr. Ing. Martin Štěpánek, M.A., Ph.D.
Řešitel: skrytý - zadáno vedoucím/školitelem
Datum přihlášení: 09.11.2016
Datum zadání: 09.11.2016
Datum a čas obhajoby: 10.06.2019 09:00
Místo konání obhajoby: Opletalova - Opletalova 26, O105, Opletalova - místn. č. 105
Datum odevzdání elektronické podoby:09.05.2019
Datum proběhlé obhajoby: 10.06.2019
Oponenti: doc. Petr Janský, M.Sc., Ph.D.
 
 
 
Kontrola URKUND:
Seznam odborné literatury
1. Richard H. Thaler; Cass R. Sunstein, 2008, Nudge: Improving decisions about health, wealth, and happiness.

2. Daniel Kahneman; Amos Tversky, 2000, Choices, values, and frames

3. Eldar Shafir, 2013, The Behavioral Foundations of Public Policy

4. Thaler, Richard; Bernartzi, Shlomo (2004) Save More Tomorrow™: Using Behavioral Economics to

5. Robert Fenge,George De Menil,Pierre Pestieau, 2008, Pension Strategies in Europe and the United States

Increase Employee Saving

6. Robert Holzmann and Edward Palmer, 2006, Pension Reform: Issues and Prospects for Non-Financial

Defined Contribution (NDC) Schemes

7. Robin L. Lumsdaine, James H. Stock, and David A. Wise, 1992,Three Models of Retirement Computational

Complexity versus Predictive Validity

8. Gordon L. Clark, Kendra Strauss, Janelle Knox-Hayes, 2012, Saving for Retirement: Intention, Context, and

Behavior

9. Ivonne Honekamp, 2014, Survey-Based Study on Partial Aspects of Retirement Decisions of Private Persons

in Germany
Předběžná náplň práce v anglickém jazyce
Research Question: How can implementations of choice architecture change the current retirement system? How can the

population of the Czech Republic benefit from the use of some techniques taken from behavioral economics?

Motivation:

For years countries have been trying to find the best ways to ensure their citizens’ well-being after

retirement. The structure of pension systems has been one of the most important and complicated questions that appears

during many meetings of politicians at all administrative levels. It is really hard to evaluate its importance, as wrong

decisions can lead to horrific consequences not only for particular households, but for countries as a whole and in some

extreme cases for the global economy. As a result of this, ensuring financial security for elderly citizens is one of the main

obligations and goals for policy makers. Unfortunately, due to diverse factors like increasing longevity, low birth

rates and financial crises, this goal is even harder to achieve. (European Union pension systems: Adequate and

sustainable?, David Eatock, 2015) Because of these factors the pension system in which pensions are paid out of the taxes

collected from the earnings of a nation’s employed sector is not effective anymore. Therefore this system is in great need

of restructuring and additional investments. The world financial institutions are in constant search of the solution for this

problem, which would strengthen social security around the world. In 2005 the World Bank introduced a brand new

recommendation for countries - a five-pillar framework. This concept was afterwards changed and adapted to the needs of

different nations according to specific features of the individual countries. Nowadays, systems with combinations of two,

three or five pillars can be found in many European countries. Unfortunately, despite these reforms nations still have to

face a huge number of problems with pensions.

In this paper I would like to focus on the retirement system in the Czech Republic. The problem of the retirement system

there has constantly been the cause of worries, as for many years the Czech pension account has been in deficit. Czech

policy-makers have to consider a lot of issues, characterized for the country. But their main concern has remained the

same for decades. The population is aging and it does not renew itself. According to a preliminary official report in 2015,

110,764 citizens were born, 11,173 died, 34,992 immigrated and 18,945 left the country. In other words the natural

increase of population was equal to -409 and net migration was 15,977. (Summary data on the Czech Republic, Czech

statistical office).

As a consequence the Czech Republic can one day find itself in a situation when there will be more seniors than employed

citizens. If the population renews itself only by immigration, measures for changing the system have to be taken, because

the existing plan will not work. The Czech Republic's retirement system now consists of two pillars. However, the system

has survived through quite a lot of complex changes during the last 22 years. In 2013 the government introduced the

second pillar, which was warmly welcomed by the IMF. The economists believed, that this reform can bring a lot of

positive changes to the condition of the Czech pension system, (IMF Country Report No. 12/115, May 2012, Czech

Republic: 2012 Article IV Consultation—Staff Report: Staff Supplements; Public Information Notice on the Executive

Board Discussion; and Statement by the Executive Director for the Czech Republic). Unfortunately the expected success

never happened and after July 2015 people could not participate in it anymore, even though it works quite well in other

countries. The official explanation of cancelling this pillar is the lack of citizens’ interest. So it can be said that the

government did not manage to properly introduce the new policy to people or to make the conditions of participation good

enough to satisfy needs of an ordinary person. As it is a proven fact that the design of the policy has a great impact on the

whole outcome. For example, Madrian and Shea (2001) stated that the default choice can lead to disastrous consequences

for citizens’ savings.

In this work, I would like to analyze how such failures can be foreseen and abolished with the help of the correct choice

architecture. I will try to study how the system in the Czech Republic can benefit from methods used in behavioral

economics. I will analyze what steps can be made to gain public interest, as not all people know that they can for example

willingly participate in retirement planning if they work abroad and afterwards return to the Czech Republic, or that even

students can save for the future. I believe that the right policy structure can change the existing situation for the better and

prevent another projects from failing.



Hypotheses

1. Choice architecture strongly affects the pension system.

2. A properly introduced policy leads to better outcomes, than a poorly proposed one.

3. People, being positively influenced to think about their future, are more likely to contribute earlier and more.

Methodology

I will design a questionnaire, consisting of common questions about for example level of education, sex, and questions

about some saving plans. Part of them will be based on the real pension system, while others would be created using the

existed pension possibilities with implications of some choice architecture’s methods. I understand that I will not be able

to obtain enough data to construct an experiment that will describe a real condition of the situation. However, I will try to

get as much data as possible. To analyze the collected data I expect to use statistical methods, like for example a linear

probability model. Moreover, I will try to use the probit model. The model will be estimated using the analytical weights

from the dataset, which I will get with the questionnaire. While doing my quantitative research I will inspire by Ivonne

Honekamp (2014) and Gordon L. Clark, Kendra Strauss, Janelle Knox-Hayes (2012). Furthermore, in my work I will

analyze the data from the Czech Statistical Office and from the World Bank’s reports.

Outline:

4. Introduction

5. Pension reform in Czech Republic

6. Second pillar

7. Effects

8. Role of the behavioral economics. Libertarian paternalism.

9. Implications of choice architecture

10. Comparison with another country

11. Conclusion
 
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