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Ageing, Funded Pensions and the Dutch Economy

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  • Lans Bovenberg
  • Thijs Knaap

Abstract

This paper attempts to paint a coherent picture of the effects of ageing on a small, open, economy with large pension funds in different institutional settings. Quantitative scenarios are projected with an applied computable general equilibrium model with institutional details. We find that ageing leads to a tighter labor market, increasing costs for both pension funds and the government, and leaving the economy vulnerable to financial and further demographic shocks. We show that defined benefit pension arrangements can be destabilizing, but less so if an average-wage variable-indexation contract is chosen. Government can help by adopting a policy of tax smoothing, but the single most important determinant of the net burden of ageing is the eventual size of the increase in labor market participation of older workers. The intergenerational welfare effects of demographic shocks and changes in international interest rates are sizable and should be an integral part of the assessment of different policy instruments.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2005/wp-cesifo-2005-02/cesifo1_wp1403.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1403.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1403

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Keywords: ageing; funded pensions; applied general equilibrium models; the Netherlands;

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References

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  1. Börsch-Supan, Axel & Ludwig, Alexander & Winter, Joachim, 2001. "Aging, pension reform, and capital flows: A multi-country simulation model," Sonderforschungsbereich 504 Publications, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim 01-08, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  2. Leon Bettendorf & R. Beetsma & P. Broer, 2000. "The Budgetary And Economic Consequences Of Ageing In The Netherlands," Computing in Economics and Finance 2000, Society for Computational Economics 372, Society for Computational Economics.
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Cited by:
  1. Erling Holmøy & Kyrre Stensnes, 2008. "Will the Norwegian pension reform reach its goals? An integrated micro-macro assessment," Discussion Papers, Research Department of Statistics Norway 557, Research Department of Statistics Norway.
  2. repec:dgr:uvatin:2007064 is not listed on IDEAS
  3. Nick Draper & Alex Armstrong, 2007. "GAMMA; a simulation model for ageing, pensions and public finances," CPB Document, CPB Netherlands Bureau for Economic Policy Analysis 147, CPB Netherlands Bureau for Economic Policy Analysis.
  4. Frank van Erp & Paul de Hek, 2009. "Analyzing labour supply of elderly people: a life-cycle approach," CPB Document, CPB Netherlands Bureau for Economic Policy Analysis 179, CPB Netherlands Bureau for Economic Policy Analysis.
  5. Christian Keuschnigg & Mirela Keuschnigg & Christian Jaag, 2011. "Aging and the Financing of Social Security in Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), Swiss Society of Economics and Statistics (SSES), vol. 147(II), pages 181-231, June.
  6. Heijdra, Ben J. & Romp, Ward E., 2009. "Retirement, pensions, and ageing," Journal of Public Economics, Elsevier, Elsevier, vol. 93(3-4), pages 586-604, April.
  7. Holmøy, Erling & Strøm, Birger, 2013. "Computable General Equilibrium Assessments of Fiscal Sustainability in Norway," Handbook of Computable General Equilibrium Modeling, Elsevier.
  8. Willem Klein Haneveld & Matthijs Streutker & Maarten Vlerk, 2011. "Collective adjustment of pension rights in ALM models," Computational Management Science, Springer, vol. 8(1), pages 137-156, April.
  9. Kinnunen, Helvi, 2008. "Government funds and demographic transition – alleviating ageing costs in a small open economy," Research Discussion Papers, Bank of Finland 21/2008, Bank of Finland.
  10. Jan-Maarten van Sonsbeek & j.m.van.sonsbeek@vu.nl, 2011. "Micro simulations on the effects of ageing-related policy measures: The Social Affairs Department of the Netherlands Ageing and Pensions Model," International Journal of Microsimulation, Interational Microsimulation Association, vol. 4(1), pages 72-99.

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