Demographic change, pension reform and redistribution in Spain
AbstractRecent demographic changes have spurred pension reforms aimed at restoring the financial sustainability of PAYG systems. In Spain, the most significant reforms were undertaken in 1997 and in 2002, entailing an increase in the length of the averaging period in the pension formula, an increase in the penalties for early retirement and for retirement with short contributive records, a bonus for retirement after the age of 65, and a change in the eligibility conditions. In this paper we use an Applied General Equilibrium model populated by two-earners households to evaluate the redistributive impact of the pension system and the financial and welfare consequences of these reforms on households that differ in their education, region of residence and year of birth. The initial redistribution is assessed by comparing the internal rate of return provided to different households. We find that they vary considerable depending on education and cohort. Regarding the reforms, we find an increase in the implicit debt of the pension system after the reforms, and important changes in welfare. Households up to secondary education born between 1935 and 1975 are predicted to benefit from the reform, while the welfare of younger cohorts will be hit by higher taxes and unfavorable macroeconomic changes.
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Bibliographic InfoPaper provided by Universidad Pablo de Olavide, Department of Economics in its series Working Papers with number 08.04.
Length: 28 pages
Date of creation: Mar 2008
Date of revision:
Social Security; Pension Reform; Applied General Equilibrium; Redistribution;
Other versions of this item:
- Alfonso Sánchez & Virginia Sánchez Marcos, 2008. "Demographic Change, Pension Reform and Redistribution in Spain," Working Papers 2008-14, FEDEA.
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
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