The Political Economy of Pension Reform in Armenia

Abstract

In this short article, I discuss some of the political economy aspects of the ongoing pension reform in Armenia. The focus is on two opposing forces - taxpayers' quite significant resistance to the reform vis-à-vis government's imperative to reform due to fiscal constraints - that are likely to shape the outcome of the reform. The discussion is centered around a fiscal contract where the government is forced to make democratic concessions in return for the taxpayers' commitment to comply with its new institutions. I argue that this conflict may push Armenia into a virtuous circle of development.