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When will the Germans Get Trapped in their Pension System?

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  • Silke Uebelmesser
  • Hans-Werner Sinn

Abstract

The upcoming demographic crisis in Germany demands fundamentalreforms of the pension system. In a democracy, reforms are, however, onlyfeasible when they are supported by the majority of the electorate. Todetermine whether the majority is in favor of reforms of the pension system,we calculate for each year the "indifference age" as the age of the cohortwhich is not affected by the reform and the "median age" as the age of thepolitically decisive cohort. Until 2023, the median age is below theindifference age implying that the young have the majority and the reformcan be democratically enforced. After 2023, Germany will be characterizedby a gerontocratic system where the old decide over the young. Only the fearthat the young might emigrate – and perhaps a certain altruistic attitudetowards their own descendants – will prevent the old from exploiting theyoung.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 561.

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Date of creation: 2001
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Handle: RePEc:ces:ceswps:_561

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Keywords: demographic crisis; pension reform; political feasibility; median age; indifference age;

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References

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  1. Myles,Gareth D., 1995. "Public Economics," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521497695.
  2. Breyer, Friedrich, 1994. "The political economy of intergenerational redistribution," European Journal of Political Economy, Elsevier, Elsevier, vol. 10(1), pages 61-84, May.
  3. Hans-Werner Sinn & Silke Übelmesser, 2000. "Wann kippt Deutschland um?," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 53(28-29), pages 20-25, November.
  4. Butler, Monika, 2000. "The political feasibility of pension reform options: the case of Switzerland," Journal of Public Economics, Elsevier, Elsevier, vol. 75(3), pages 389-416, March.
  5. Marcel Thum & Jakob von Weisäcker, 2000. "Implizite Einkommensteuer als Messlatte für die aktuellen Rentenreformvorschläge," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, Verein für Socialpolitik, vol. 1(4), pages 453-468, November.
  6. Fehr, Hans, 2000. " Pension Reform during the Demographic Transition," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 102(3), pages 419-43, June.
  7. Sinn, Hans-Werner, 1999. "Gesetzliche Rentenversicherung: Prognosen im Vergleich," Munich Reprints in Economics, University of Munich, Department of Economics 19871, University of Munich, Department of Economics.
  8. Georg Hirte, 1999. "Raising the Retirement Age--Why Should Anybody Lose?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 219(3+4), pages 393-408, September.
  9. Hans-Werner Sinn & Martin Werding, 2000. "Rentenniveausenkung und Teilkapitaldeckung - ifo Empfehlungen zur Konsolidierung des Umlageverfahrens," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 53(18), pages 12-25, 06.
  10. Vincenzo Galasso, 1999. "The US Social Security System: What Does Political Sustainability Imply?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 698-730, July.
  11. Browning, Edgar K, 1975. "Why the Social Insurance Budget Is Too Large in a Democracy," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 13(3), pages 373-88, September.
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Cited by:
  1. Ehrentraut, Oliver & Raffelhüschen, Bernd, 2003. "Die Rentenversicherung unter Reformdruck: Ein Drama in drei Akten," Discussion Papers 109, Institut für Finanzwissenschaft, Albert-Ludwigs-Universität Freiburg.

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