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Implicit Pension Debt and the Role of Public Pensions for Human Capital Accumulation: An Assessment for Germany

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  • Werding, Martin

Abstract

Implicit 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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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/14172/1/pie_dp283.pdf
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Bibliographic Info

Paper provided by Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University in its series Discussion Paper with number 283.

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Length: 45 p.
Date of creation: Jan 2006
Date of revision:
Handle: RePEc:hit:piedp1:283

Note: Final version, January 2006
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Related research

Keywords: Public pensions; public debt; Germany; human capital; fertility;

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References

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  1. Michele Boldrin & Mariacristina De Nardi & Larry E. Jones, 2005. "Fertility and Social Security," Staff Report 359, Federal Reserve Bank of Minneapolis.
  2. Robert Fenge & Martin Werding, 2003. "Ageing and Fiscal Imbalances Across Generations: Concepts of Measurement," CESifo Working Paper Series 842, CESifo Group Munich.
  3. Paul van den Noord & Richard Herd, 1993. "Pension Liabilities in the Seven Major Economies," OECD Economics Department Working Papers 142, OECD Publishing.
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Cited by:
  1. D. Blanchet & S. Le Minez, 2012. "Joint macro/micro evaluations of accrued-to-date pension liabilities: an application to French reforms," Documents de Travail de la DESE - Working Papers of the DESE g2012-14, Institut National de la Statistique et des Etudes Economiques, DESE.
  2. Luca Beltrametti & Matteo Della Valle, 2011. "Does the implicit pension debt mean anything after all?," CeRP Working Papers 118, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  3. Beltrametti, Luca & Della Valle, Matteo, 2011. "Does pension debt mean anything after all?," MPRA Paper 29694, University Library of Munich, Germany.
  4. Heidler, Matthias & Müller, Christoph & Weddige, Olaf, 2009. "Measuring accrued-to-date liabilities of public pension systems: Method, data and limitations," FZG Discussion Papers 37, Research Center for Generational Contracts (FZG), University of Freiburg.
  5. Beltrametti, Luca & Della Valle, Matteo, 2012. "The Implicit Pension Debt: Its Meaning and an International Comparison - Il debito pensionistico: significato e confronti internazionali," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 65(1), pages 15-38.

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