Exploring the Drivers of Pension Fund Growth: An Empirical Study of Direct and Indirect Factors in OECD Economies

Abstract

Purpose – The purpose of the study is to investigate the relationship between pension funds’ growth and macro factors like dependency ration, replacement rate, average wage, working wage etc. The study aims to demonstrate the variation observed in behavior of these factors in high and low growth-oriented OECD countries and helps to have better understanding of the macro factors to support huge asset holding financial sector of OECD economies.

Design/methodology/approach – To bring out the core macro factors determining pension fund growth hierarchical regression technique was used on dynamic panel data model to check the individual significance of included variables in the model progressively and for this purpose R²-change was observed.

Findings – The study explores that OECD economies behave differently on the bases of their growth perspective i.e. Average Age, Working Wage, Personal Income Tax and Inflation are positively contributing to pension funds in HGO economies and negative in LGO ones.

Originality/value – The approach used in the paper could be of practical benefit to policy makers and data analysts of OECD pension funds departments in their decision-making regarding pension fund management and core determinants behind it. The macroeconomic factors used in the study have been identified by going through a literature survey of research carried out in various economies. Therefore, the study could be applicable in different economies at a time for a cross-country analysis of pension funds growth.