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A Projection of Spanish Pension System under Demographic Uncertainty

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  • Namkee Ahn
  • Javier Alonso-Meseguer
  • Juan Ramón García

Abstract

The objective of this paper is to carry out a projection of the pension expenditures under demographic uncertainty in Spain. In order to obtain a stochastic pension expenditure projection, as well as the number of pensioners and the number of contributors, we use a stochastic population projection. Demographic situation with respect to the pension system in Spain shows a dramatic change during the first half of this century. It will be relatively favorable during the first two decades due to the increasing participation and employment rates as well as due to the relatively small civil war generations occupying dependent old ages while the baby boom generations staying in working ages. Starting from around 2030, however, the situation is completely reversed as the baby-boomers start to retire from the labor market while the working age population consists mostly of much smaller baby bust generations. The financial situation of Spanish pension system appears to be affected significantly by the above mentioned demographic situation. During the first few decades it will enjoy a small surplus. Most importantly, the deficit during the subsequent decades will be large and increasing over time. In 2050, the deficit will be higher than 6% of GDP by the probability of 0.90, and will be higher than 15% by the 0.10 probability. In the same year, the range of the debt (accumulated deficit) will be between 77% and 260% of GDP by the 80% confidence interval.

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File URL: http://documentos.fedea.net/pubs/dt/2005/dt-2005-20.pdf
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Paper provided by FEDEA in its series Working Papers with number 2005-20.

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Handle: RePEc:fda:fdaddt:2005-20

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  1. Lee, Ronald D., 1992. "Stochastic demographic forecasting," International Journal of Forecasting, Elsevier, vol. 8(3), pages 315-327, November.
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Cited by:
  1. Carlos Vidal-Meliá & Inmaculada Domínguez-Fabián & María del Carmen Boado-Penas, . "Notional Defined Contribution Accounts (NDCs): Solvency and Risk; Application to the Case of Spain," Studies on the Spanish Economy 226, FEDEA.
  2. Andrés J. Marchante Mera & Bienvenido Ortega Aguaza & José Sánchez Maldonado, 2006. "Las dimensiones del bienestar en las Comunidades Autónomas Españolas. Un análisis de Sigma y Gamma-Convergencia," Working Papers 2006-05, FEDEA.
  3. Pedro N. Rodríguez, & Simón Sosvilla-Rivero, 2006. "Understanding and Forecasting Stock Price Changes," Working Papers 2006-03, FEDEA.

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