Implicit Pension Debt and the Role of Public Pensions for Human Capital Accumulation: An Assessment for Germany
AbstractImplicit pension debt involved in existing pay-as-you-go public pension schemes is nowadays seen as an important determinant of the long-term sustainability of general government finances. Explicit up-dated calculations regarding its size are however largely lacking. The present paper takes up the lessons that emerge from the relevant literature and estimates the amount of implicit pension debt for the German Statutory Pension Scheme under the current legal framework as well as over the series of reforms that have been enacted during the last fifteen years. It is demonstrated that, through these reforms, implicit liabilities have been reduced substantially but are nevertheless still sizeable. Even if future contribution rates are increased as prescribed by current rules, there will be a notable gap in the German public pension scheme's total balance sheet. In the second part of the paper, it is also discussed that, by the way they are conventionally designed, unfunded pension schemes may have a negative impact on human capital accumulation and, hence, on future contributions. A proposal for how this source of potential intrinsic instability could be removed by redesigning the German public pension scheme is then sketched.
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Bibliographic InfoPaper provided by Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University in its series Discussion Paper with number 283.
Length: 45 p.
Date of creation: Jan 2006
Date of revision:
Note: Final version, January 2006
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Public pensions; public debt; Germany; human capital; fertility;
Find related papers by JEL classification:
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- H6 - Public Economics - - National Budget, Deficit, and Debt
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
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