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What drives pension reforms in the OECD?

Author

Listed:
  • Roel Beetsma
  • Franc Klaassen
  • Ward Romp
  • Ron van Maurik

Abstract

SUMMARYBased on narrative identification, we construct a novel comprehensive dataset of pension reform measures in OECD countries from 1970 to 2017. We then study the timing of these measures. Our main and new result is that business cycle indicators are important for their timing: a worsening makes contractionary measures more likely and expansionary measures less likely. The demography matters only in the sense that the OECD-wide demography explains the general reform trend for a country. We find no evidence that country-specific or short-run demographic developments matter. We discuss a conceptual framework with adjustment costs of changing pension generosity that can account for both the reform responsiveness to the business cycle and the lack of responsiveness to changes in demographic forecasts. We also discuss potential policy implications of our findings.

Suggested Citation

  • Roel Beetsma & Franc Klaassen & Ward Romp & Ron van Maurik, 2020. "What drives pension reforms in the OECD?," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 35(102), pages 357-402.
    • Handle: RePEc:oup:ecpoli:v:35:y:2020:i:102:p:357-402.
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    File URL: http://hdl.handle.net/10.1093/epolic/eiaa011
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    Citations

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    Cited by:

    1. Iwo Augustynski & Lukasz Jurek, 2021. "Being Old in the Age of Aging: Macro-Level Determinants of Change in Perception of Old Age Threshold in EU Countries," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 3), pages 767-784.
    2. Romp, Ward & Beetsma, Roel, 2023. "OECD pension reform: The role of demographic trends and the business cycle," European Journal of Political Economy, Elsevier, vol. 77(C).
    3. Huixin Bi & Sarah Zubairy, 2020. "Public Pension Reforms and Fiscal Foresight: Narrative Evidence and Aggregate Implications," Research Working Paper RWP 20-06, Federal Reserve Bank of Kansas City.

    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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