Pension reform and demographic uncertainty: the case of Germany

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract. The present paper compares the distributional and risk-sharing consequences of two pension reform proposals in Germany which both aim to improve the sustainability of the current system by introducing demographic variables to the benefit calculation. While the first reform proposes a so-called " sustainability factor" which measures the changes in the dependency ratio, the second reform proposes a so-called " demographic factor" which takes into account the changes in life expectancy. Our simulations indicate that both reforms imply a double burden for currently middle-aged generations and a double relief for future living generations. Terms of use: Documents inOn the one side, resources are redistributed from currently towards future living generations.In addition, part of the risk from demographic uncertainty is shifted from future living towards currently living middle-aged generations. The reforms differ, however, with respect to the magnitude of the resource distribution and risk implications. Therefore, future generations are much better of with the " sustainability factor", while it is not clear whether middle-aged generations are better off with the " demographic factor" or the " sustainability factor". JEL classification: D58, H55, J11Key words: Stochastic population forecasts, CGE models, pension reform in Germany * This paper was written within the EU-project " Demographic uncertainty and the sustainability of social welfare systems" (QLK6-CT-2002-02500). We would also like to thank Eckart Bomsdorf for providing mortality projections, Bernd Raffelhüschen for providing age profiles for health care, long-term care and education outlays and Susanne Schmid (Federal Statistical Office) for providing population data.

The dynamic fiscal effects of demographic shift: The case of Australia

“…As already mentioned, our model does not distinguish between native and immigrant households in terms of their behaviour, with immigrants assumed to behave exactly the same as native households of the same age. This is a standard assumption in this type of model (see, for example, Fehr and Habermann, 2006).…”

“…This description of the population dynamics is based onFehr and Habermann (2006).Similarly toKotlikoff et al (2007) andFehr and Habermann (2006), our economic model does not distinguish between immigrants and the native population on the household side, meaning that the economic behaviour of immigrants is exactly the same as that of native-born households.…”

Sustainability of the Pension System in the Republic of Macedonia: Challenges and Solutions

“…Furthermore, Fehr and Habermann (2004), using the combination of demographic and economic factors, dealt with the sustainability of the German pension system under the influence of the uncertainty of demographic factors for the period 2001-2050. So, the authors use stochastic forecasts for fertility and mortality, while an overlapping generation model (including 3 sectors: household, production, and government) is used for economic variables.…”

Computable Stochastic Equilibrium Models and Their Use in Pension- and Ageing Research

“…19 Of course, it is possible to proceed one step further and compute the distribution of welfare effects for different policy reforms. For example, Fehr and Habermann (2006) compare the cohort-specific expected welfare changes for two German pension-reform proposals aimed to reduce future expenditures and contributions. In order to capture the implied intergenerational risk-sharing consequences, we compute for each generation the (normalized) ratio of the standard deviation of the sample-path-specific utility levels in order to reveal whether the reform has increased or decreased generation-specific risk.…”