Feet of Clay? The Political Economy of Adopting and Abolishing Private Pensions

This paper argues that the recent reversals in pension privatization hold important lessons for the political economy of pension reform. While international policy diffusion accelerated the adoption of private systems, pushing diffusion in some cases even too far, domestic factors were crucial in explaining the reversals. In particular, the interaction between problem pressure in the form of high public debt, weak financial markets, and politically unconstrained governments can explain when and why countries renationalize their pension systems. The article uses a mixed methods design: a pooled cross-section analysis shows the role of the domestic political economy for the long-run stability of privatization and serves as a tool for case selection; a qualitative controlled comparison between four countries gives evidence when and why governments re-nationalize pension systems.