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Volatility of Social Security Wealth: Political Risks of Benefit-Rule Changes in Germany

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  • Christoph Borgmann
  • Matthias Heidler
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    Abstract

    We address the question of how the generosity of the German public pension systems' benefit rule has changed during the past three decades. In order to do so, we firstly outline the social security reforms of the past 50 years. Then, we illustrate political risk by measuring the volatility of social security wealth induced by the legislative benefit rule changes. Our results show that the standard deviation resulting in the scenarios and cohorts considered is well over 10%. Furthermore, it turns out that the gross social security wealth can be subject to losses between 30% and 60% over the life cycle.

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    Bibliographic Info

    Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

    Volume (Year): 63 (2007)
    Issue (Month): 1 (March)
    Pages: 83-106

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    Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200703)63:1_83:vosswp_2.0.tx_2-o

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    Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
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    Related research

    Keywords: social security wealth; political risk; Germany;

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    1. Sinn, Hans-Werner, 1998. "The Pay-As You-Go Pension System as a Fertility Insurance and Enforcement Device," CEPR Discussion Papers 2023, C.E.P.R. Discussion Papers.
    2. Sinn, Hans-Werner, 2004. "The pay-as-you-go pension system as fertility insurance and an enforcement device," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1335-1357, July.
    3. Arnds, Pascal & Bonin, Holger, 2002. "Frühverrentung in Deutschland: Ökonomische Anreize und institutionelle Strukturen," IZA Discussion Papers 666, Institute for the Study of Labor (IZA).
    4. John McHale, 1999. "The Risk of Social Security Benefit Rule Changes: Some International Evidence," NBER Working Papers 7031, National Bureau of Economic Research, Inc.
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