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Pension reform and demographic uncertainty: the case of Germany

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  • FEHR, HANS
  • HABERMANN, CHRISTIAN

Abstract

The present paper compares the distributional and risk-sharing consequences of two pension reform options 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. On 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 off with the sustainability factor , while it is not clear whether middle-aged generations are better off with the demographic factor or the sustainability factor .

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Bibliographic Info

Article provided by Cambridge University Press in its journal Journal of Pension Economics and Finance.

Volume (Year): 5 (2006)
Issue (Month): 01 (March)
Pages: 69-90

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Handle: RePEc:cup:jpenef:v:5:y:2006:i:01:p:69-90_00

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  1. Ronald D. Lee & Ryan D. Edwards, 2001. "The fiscal impact of population change," Conference Series ; [Proceedings], Federal Reserve Bank of Boston.
  2. Beetsma, R.M.W.J. & Bettendorf , L.J.H. & Broer, D.P., 2003. "The budgeting and economic consequences of ageing in the Netherlands," Open Access publications from Tilburg University urn:nbn:nl:ui:12-383717, Tilburg University.
  3. Axel Boersch-Supan & Florian Heiss & Alexander Ludwig & Joachim Winter, 2003. "Pension Reform, Capital Markets and the Rate of Return," German Economic Review, Verein für Socialpolitik, vol. 4(2), pages 151-181, 05.
  4. Hans Fehr & Sabine Jokisch & Larry Kotlikoff, 2003. "The Developed World's Demographic Transition - the Roles of Capital Flows, Immigration, and Policy," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-133, Boston University - Department of Economics.
  5. Georg Hirte, 2002. "Welfare and Macroeconomic Effects of the German Pension Acts of 1992 and 1999: A Dynamic CGE Study," German Economic Review, Verein für Socialpolitik, vol. 3(1), pages 81-106, 02.
  6. Fehr, Hans, 1999. "Welfare Effects of Dynamic Tax Reforms," Beiträge zur Finanzwissenschaft, Mohr Siebeck, Tübingen, edition 1, volume 5, number urn:isbn:9783161470165, December.
  7. Bonin, Holger, 2001. "Will it Last? An Assessment of the 2001 German Pension Reform," IZA Discussion Papers 343, Institute for the Study of Labor (IZA).
  8. Fehr, Hans, 2000. " Pension Reform during the Demographic Transition," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(3), pages 419-43, June.
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Cited by:
  1. Lassila , Jukka & Valkonen, Tarmo, 2008. "Population ageing and fiscal sustainability in Finland: a stochastic analysis," Research Discussion Papers 28/2008, Bank of Finland.
  2. Erling Holmøy & Kyrre Stensnes, 2008. "Will the Norwegian pension reform reach its goals? An integrated micro-macro assessment," Discussion Papers 557, Research Department of Statistics Norway.
  3. Lassila, Jukka & Valkonen, Tarmo, 2007. "Longevity Adjustment of Pension Benefits," Discussion Papers 1073, The Research Institute of the Finnish Economy.
  4. Hans Fehr, 2009. "Computable Stochastic Equilibrium Models and Their Use in Pension- and Ageing Research," De Economist, Springer, vol. 157(4), pages 359-416, December.

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