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Endogenous Retirement and Public Pension System Reform in Spain

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Author Info
Alfonso R Sánchez-Martín () (Department of Economics, Universidad Pablo de Olavide)

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Abstract

All around the world, population aging has spurred developed countries to reform their PAYG pension systems. In particular, delaying legal retirement ages and reducing the generosity of pension benefits have been widely implemented changes. In this paper we assess how successful those policies can be in the case of the Spanish economy, and compare with the results obtained by the already implemented reforms (1997 and 2001). This evaluation is accomplished in a heterogeneous-agents, applied general equilibrium model where individuals can adjust their retirement ages in response to changes in pension rules. We check the ability of the model to reproduce the basic stylized facts of retirement behavior (specially the pattern of early retirement induced by minimum pensions). We then use to model to explore the impact of pension reforms. We find that already implemented changes actually increase the implicit liabilities of the system, while delaying the legal retirement age to 68 may roughly halve the size of the current pension debt.

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File URL: http://www.upo.es/serv/bib/wps/econ0806.pdf
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Publisher Info
Paper provided by Universidad Pablo de Olavide, Departamento de Economía in its series Working Papers with number 08.06.

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Length: 31 pages
Date of creation: Mar 2008
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Handle: RePEc:pab:wpaper:08.06

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Related research
Keywords: Pension System Reform Applied General Equilibrium Retirement.

Other versions of this item:

Find related papers by JEL classification:
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
J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped
J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Kenc, T. & Perraudin, W., 1995. "European Pension Systems: A Simulation Analysis," Cambridge Working Papers in Economics 9505, Faculty of Economics, University of Cambridge.
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    Other versions:
  3. Michele Boldrin & Sergi Jimenez-Martni & Franco Peracchi, 1997. "Social Security and Retirement in Spain," NBER Working Papers 6136, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Turalay Kenc & William Perraudin, 1996. "Pension Systems in Europe: A General Equilibrium Study," Archive Working Papers 018, Birkbeck, The Institute for Financial Research.
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  7. Sergi Jiménez-Martín & Alfonso R. Sánchez, 2003. "An Evaluation of the Life-cycle Effects of Minimum Pensions on Retirement Behavior," Economics Working Papers 715, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2006. [Downloadable!]
    Other versions:
  8. Peter Diamond, 2004. "Social Security," American Economic Review, American Economic Association, vol. 94(1), pages 1-24, March. [Downloadable!]
  9. Luis Puch & Omar Licandro, . "Are there any special features in the Spanish business cycles?," Working Papers 97-06, FEDEA.
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  10. Siu Fai Leung, 2000. "Why Do Some Households Save So Little? A Rational Explanation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(4), pages 771-800, October. [Downloadable!] (restricted)
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  16. Miles, David, 1999. "Modelling the Impact of Demographic Change upon the Economy," Economic Journal, Royal Economic Society, vol. 109(452), pages 1-36, January. [Downloadable!] (restricted)
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  17. Bernard Casey & Howard Oxley & Edward Whitehouse & Pablo Antolin & Romain Duval & Willi Leibfritz, 2003. "Policies for an Ageing Society: Recent Measures and Areas for Further Reform," OECD Economics Department Working Papers 369, OECD Economics Department. [Downloadable!]
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Alfonso R Sánchez-Martín & Virginia Sánchez Marcos, 2008. "Demographic change, pension reform and redistribution in Spain," Working Papers 08.04, Universidad Pablo de Olavide, Departamento de Economía. [Downloadable!]
    Other versions:
  2. Juan F. Jimeno & Juan A. Rojas & Sergio Puente, 2006. "Modeling the impact of aging on social security expenditures," Banco de España Occasional Papers 0601, Banco de España. [Downloadable!]
    Other versions:
  3. Sergi Jiménez-Martín & Alfonso R. Sánchez Martín, 2007. "An evaluation of the life cycle effects of minimum pensions on retirement behavior," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(5), pages 923-950. [Downloadable!]
    Other versions:
  4. Javier Diaz-Gimenez & Julian Diaz-Saavedra, . "Delaying Retirement in Spain," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics. [Downloadable!] (restricted)
    Other versions:
  5. Mario Catalán & Jaime Guajardo & Alexander W. Hoffmaister, 2007. "Coping with Spain's Aging: Retirement Rules and Incentives," IMF Working Papers 07/122, International Monetary Fund. [Downloadable!]
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