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Demography, Sustainability, and Growth Notes on the future of the European "Social Market" Economy

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  • Fabio Pammolli

    ()
    (IMT Lucca Institute for Advanced Studies and CERM Foundation - Competitività, Regole, Mercati)

Abstract

In most European countries, a rebalance of the excess of Pay-as-You-Go financing for pension and health expenditure is important, to reduce the current and expected future pressure on public finances. A debate should be promoted on how to achieve an optimal design, which combines PayGo and real accumulation plans. In general, a few priorities can be outlined for a new dialogue on the future of the European Social Market Economy: 1) Increase the technical quality of pension and health care expenditure projections incorporated in the annual Stability Programs of EU Partners, developing adequate sensitivity analysis around the central scenario through sound stochastic models (A stress test on fiscal sustainability of welfare systems); 2) Strengthen the link between medium-long term projections and the economic policy guidelines that EU Partners indicate at the end of the discussion session of Stability Programs; 3) Strengthen the link between the policy guidelines at European level and the annual budget of each Partner; 4) Promote a debate on the future of the European Social Market Economy, with a specific focus on the consequences of the status quo for States and individuals, as well as for economic growth and fiscal consolidation; 5) Promote a debate on how to achieve a balance between PayGo and capitalized funds to finance age related expenditures for pensions and health. Such an effort could contribute to set up a common ground to coordinate welfare systems among Member States, with positive effects on the mobility of labor and capital.

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Bibliographic Info

Paper provided by Competitività Regole Mecati (CERM) in its series Working Papers with number 01-2013.

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Length: 12 pages
Date of creation: Oct 2013
Date of revision:
Handle: RePEc:ern:wpaper:01-2013

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Keywords: health expenditure; welfare; demography; sustainability; paygo;

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References

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  1. Lindbeck, Assar & Persson, Mats, 2002. "The Gains from Pension Reform," Working Paper Series, Research Institute of Industrial Economics 580, Research Institute of Industrial Economics.
  2. Andrew Abel & Gregory N. Mankiw & Lawrence H. Summers & Richard Zeckhauser, . "Assessing Dynamic Efficiency: Theory and Evidence," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 14-88, Wharton School Rodney L. White Center for Financial Research.
  3. Fabio Pammolli & Nicola Carmine Salerno, 2010. "I trend della spesa sanitaria e le ragioni del finanziamento multipillar con componente ad accumulazione reale," Working Papers, Competitività Regole Mecati (CERM) 06-2010, Competitività Regole Mecati (CERM).
  4. Fabio Pammolli & Nicola Carmine Salerno, 2004. "Le proiezioni di lungo periodo della spesa sociale nell'UE: l'impatto demografico e il possibile impatto della tecnologia sulla spesa sanitaria," Working Papers, Competitività Regole Mecati (CERM) 02-2004, Competitività Regole Mecati (CERM).
  5. Salerno, Nicola Carmine & Pammolli, Fabio, 2012. "La Riforma del Welfare, il Paygo, i nuovi Ammortizzatori per il Mercato del Lavoro
    [Reform of Welfare System, Scale of functioning of PayGo, and development of modern Unemployment Benefits]
    ," MPRA Paper 38396, University Library of Munich, Germany, revised 15 Apr 2012.
  6. Broer, D.P. & Westerhout, E.W.M.T. & Bovenberg, A.L., 1994. "Taxation, pension and saving in a small open economy," Open Access publications from Tilburg University urn:nbn:nl:ui:12-148754, Tilburg University.
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  9. Pammolli, Fabio & Salerno, Nicola, 2011. "The Multipillar System for Health Care Financing: Thirteen Good Reasons for Open Capitalisation Funds, Covering both Pension and Health Care Provisions," MPRA Paper 36928, University Library of Munich, Germany.
  10. Martin Feldstein, 1996. "The Missing Piece in Policy Analysis: Social Security Reform," NBER Working Papers 5413, National Bureau of Economic Research, Inc.
  11. Cui, Jiajia & Jong, Frank De & Ponds, Eduard, 2011. "Intergenerational risk sharing within funded pension schemes," Journal of Pension Economics and Finance, Cambridge University Press, Cambridge University Press, vol. 10(01), pages 1-29, January.
  12. Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1994. "Generational Accounting: A Meaningful Way to Evaluate Fiscal Policy," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 8(1), pages 73-94, Winter.
  13. Roger H. Gordon & Hal R. Varian, 1985. "Intergenerational Risk Sharing," NBER Working Papers 1730, National Bureau of Economic Research, Inc.
  14. Meena Seshamani & Alastair Gray, 2004. "Ageing and health-care expenditure: the red herring argument revisited," Health Economics, John Wiley & Sons, Ltd., vol. 13(4), pages 303-314.
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