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Population Aging and the Rising Cost of Public Pensions

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  • John Bongaarts
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    Abstract

    Rapid population aging is raising concerns about the sustainability of public pension systems in high-income countries. The first part of this study identifies the four factors that determine trends in public pension expenditures: population aging, pension benefit levels, the mean age at retirement, and the labor force participation rate. The second part presents projections to 2050 of the impact of demographic trends on public pension expenditures in the absence of changes in pension benefits, labor force participation, and age at retirement. These projections demonstrate that current trends are unsustainable, because without reforms population aging will produce an unprecedented and harmful accumulation of public debt. A number of projection variants assess the potential impact of policy options aimed at improving the sustainability of public pension systems. Although the conventional responses are considered, particular attention is given to the demographic options of encouraging higher fertility and permitting more immigration. This analysis is illustrated with data from the seven largest OECD countries. Copyright 2004 The Population Council, Inc..

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    Bibliographic Info

    Article provided by The Population Council, Inc. in its journal Population and Development Review.

    Volume (Year): 30 (2004)
    Issue (Month): 1 ()
    Pages: 1-23

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    Handle: RePEc:bla:popdev:v:30:y:2004:i:1:p:1-23

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    Cited by:
    1. Luca Marchiori & Olivier Pierrard & Henri R. Sneessens, 2011. "Demography, capital flows and unemployment," CREA Discussion Paper Series 11-14, Center for Research in Economic Analysis, University of Luxembourg.
    2. Kalseth, Jorid & Halvorsen, Thomas & Kalseth, Birgitte & Sarheim Anthun, Kjartan & Peltola, Mikko & Kautiainen, Kirsi & Häkkinen, Unto & Medin, Emma & Lundgren, Jonatan & Rehnberg, Clas & Másdóttir, 2014. "Cross-country comparisons of health-care costs: The case of cancer treatment in the Nordic countries," Health Policy, Elsevier, vol. 115(2), pages 172-179.
    3. Billari, Francesco C. & Galasso, Vincenzo, 2008. "What Explains Fertility? Evidence from Italian Pension Reforms," CEPR Discussion Papers 7014, C.E.P.R. Discussion Papers.
    4. Fanny A. Kluge & Emilio Zagheni & Elke Loichinger & Tobias Vogt, 2014. "The advantages of demographic change after the wave: fewer and older, but healthier, greener, and more productive?," MPIDR Working Papers WP-2014-003, Max Planck Institute for Demographic Research, Rostock, Germany.
    5. Jack DeWaard & James Raymer, 2012. "The temporal dynamics of international migration in Europe: Recent trends," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 26(21), pages 543-592, June.
    6. Melnikov, Alexander & Romaniuk, Yulia, 2006. "Evaluating the performance of Gompertz, Makeham and Lee-Carter mortality models for risk management with unit-linked contracts," Insurance: Mathematics and Economics, Elsevier, vol. 39(3), pages 310-329, December.
    7. Aggarwal, Raj & Goodell, John W., 2013. "Political-economy of pension plans: Impact of institutions, gender, and culture," Journal of Banking & Finance, Elsevier, vol. 37(6), pages 1860-1879.
    8. Verbič, Miroslav & Spruk, Rok, 2011. "Aging population and public pensions: theory and evidence," MPRA Paper 38914, University Library of Munich, Germany.
    9. David Backus & Thomas Cooley & Espen Henriksen, 2013. "Demography and Low Frequency Capital Flows," NBER Working Papers 19465, National Bureau of Economic Research, Inc.
    10. Miroslav Verbič & Rok Spruk, 2014. "Aging Population and Public Pensions: Theory and Macroeconometric Evidence," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(3), pages 289-316, June.
    11. Jack DeWaard & Keuntae Kim & James Raymer, 2012. "Migration Systems in Europe: Evidence From Harmonized Flow Data," Demography, Springer, vol. 49(4), pages 1307-1333, November.
    12. Libich, Jan & Nguyen, Dat & Stehlik, Petr, 2014. "Monetary Exit and Fiscal Spillovers," MPRA Paper 57266, University Library of Munich, Germany.
    13. Koissi, Marie-Claire & Shapiro, Arnold F. & Hognas, Goran, 2006. "Evaluating and extending the Lee-Carter model for mortality forecasting: Bootstrap confidence interval," Insurance: Mathematics and Economics, Elsevier, vol. 38(1), pages 1-20, February.

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