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Actuarial Neutrality across Generations Applied to Public Pensions under Population Ageing: Effects on Government Finances and National Saving

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  • Heikki Oksanen
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    Abstract

    In welfare states, collective saving has declined to a persistently negative level, while reduced fertility and increasing longevity are leading to increasing pension liabilities. Actuarial neutrality across generations is presented as a benchmark for designing pension reforms to meet the challenges of population ageing. It is shown that this condition can be respected by a wide range of pension reforms, with very different consequences for public finance target setting. The rules for public pensions in national accounting are also discussed. Finally, the combined effects of population ageing and public pension rules on national saving are discussed.

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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-2005-07/cesifo1_wp1501.pdf
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    Bibliographic Info

    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1501.

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    Date of creation: 2005
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    Handle: RePEc:ces:ceswps:_1501

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    Keywords: pensions; actuarial neutrality; public debt; national accounts;

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    1. Tuomas Saarenheimo, 2005. "Ageing, interest rates, and financial flows," Labor and Demography 0508015, EconWPA.
    2. Franco, Daniele & Marino, Maria Rosaria & Zotteri, Stefania, 2004. "Pension Expenditure Projections, Pension Liabilities and European Union Fiscal Rules," Discussion Paper 231, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    3. Oksanen, Heikki, 2005. "Public pensions in the national accounts and public finance targets," Journal of Pension Economics and Finance, Cambridge University Press, vol. 4(03), pages 291-312, November.
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    7. Hans-Werner Sinn, 2000. "Why a Funded Pension System is Useful and Why It is Not Useful," NBER Working Papers 7592, National Bureau of Economic Research, Inc.
    8. Martin Feldstein, 2005. "Structural Reform of Social Security," NBER Working Papers 11098, National Bureau of Economic Research, Inc.
    9. Peter A. Diamond & Peter R. Orszag, 2005. "Saving Social Security," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 11-32, Spring.
    10. Peter Diamond, 2004. "Social Security," American Economic Review, American Economic Association, vol. 94(1), pages 1-24, March.
    11. Martin Feldstein, 2005. "Rethinking Social Insurance," NBER Working Papers 11250, National Bureau of Economic Research, Inc.
    12. Heikki Oksanen, 2003. "Population ageing and public finance targets," European Economy - Economic Papers 196, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
    13. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
    14. Saarenheimo , Tuomas, 2005. "Ageing, interest rates, and financial flows," Research Discussion Papers 2/2005, Bank of Finland.
    15. Andrew A. Samwick, 2000. "Is Pension Reform Conducive to Higher Saving?," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 264-272, May.
    16. Bosworth, Barry & Burtless, Gary, 2004. "Pension Reform and Saving," National Tax Journal, National Tax Association, vol. 57(3), pages 703-27, September.
    17. Feldstein, Martin, 2005. "Structural Reform of Social Security," Scholarly Articles 2794830, Harvard University Department of Economics.
    18. Heikki Oksanen, 2004. "Pension reforms: an illustrated basic analysis," European Economy - Economic Papers 201, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
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