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Spanish Pension System: Population Aging and Immigration Policy

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  • Javier Vázquez Grenno

    ()
    (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona)

Abstract

There is a widespread consensus in the literature that, as consequence of the demographic transition, the current Spanish pension system will become unsustainable in the next decades. In this article we evaluate the sustainability of the contributory pensions' sub-system, taking into account the demographic projections by the Spanish Statistical Oce (INE). A baseline scenario is projected as well as several reforms are simulated, focusing on: (i) selective immigration policy, (ii) changes in the way of tting the pensions and (iii) increase of the legal age of retirement up to 68. The main results are the following. The current system would not incur de cits until 2018, from then de cits will begin to be accumulated. The expenditure in pensions practically would double (from 8.3 % in 2005 to 17.2 % in 2050). A selective immigration policy -towards foreign young people- would help, but does not solve the long-term sustainability of the current system. A policy that combines a pensions' growth at a pace lower than productivity growth and extends the legal age of retirement up to 68 would give solvency to the system beyond 2029.

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Bibliographic Info

Paper provided by Department of Applied Economics at Universitat Autonoma of Barcelona in its series Working Papers with number wpdea0902.

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Length: 39 pages
Date of creation: Apr 2009
Date of revision:
Handle: RePEc:uab:wprdea:wpdea0902

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Keywords: Immigration policy; public pensions; sustainability.;

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  1. David Blake & Les Mayhew, 2006. "On The Sustainability of the UK State Pension System in the Light of Population Ageing and Declining Fertility," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 116(512), pages F286-F305, 06.
  2. James Feyrer, 2007. "Demographics and Productivity," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 100-109, February.
  3. David N. Weil, 2006. "Population Ageing," Working Papers id:506, eSocialSciences.
  4. Rafael Domenech & Ángel Melguizo, 2008. "Projecting Pension Expenditures in Spain: On Uncertainty, Communication and Transparency," Working Papers, International Economics Institute, University of Valencia 0803, International Economics Institute, University of Valencia.
  5. Javier Diaz-Gimenez & Julian Diaz-Saavedra, 2009. "Delaying Retirement in Spain," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 147-167, January.
  6. M. Dolores Collado & Iñigo Iturbe Ormaetxe & Guadalupe Valera, 2002. "Quantifying The Impact Of Immigration On The Spanish Welfare State," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2002-04, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  7. Holger Bonin & Bernd Raffelhüschen & Jan Walliser, . "Can Immigration Alleviate the Demographic Burden?," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 99-17, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  8. Joan Gil & Miguel Angel López García & Jorge Onrubia & Cío Patxot & Guadalupe Souto, 2007. "A projection model of the contributory pension expenditure of the spanish social security system: 2004-2050," Hacienda Pública Española, IEF, IEF, vol. 182(3), pages 75-116, September.
  9. Poul Schou, 2006. "Immigration, integration and fiscal sustainability," Journal of Population Economics, Springer, Springer, vol. 19(4), pages 671-689, October.
  10. Kjetil Storesletten, 2000. "Sustaining Fiscal Policy through Immigration," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(2), pages 300-323, April.
  11. Castro Martín Teresa & Roig Vila Marta, 2007. "Immigrant Mothers, Spanish Babies. Childbearing Patterns of Foreign Women in Spain," Working Papers, Fundacion BBVA / BBVA Foundation 201086, Fundacion BBVA / BBVA Foundation.
  12. Balmaseda, Manuel & Melguizo, Angel & Taguas, David, 2006. "Las reformas necesarias en el sistema de pensiones contributivas en España
    [Reforming the Spanish contributory pension system]
    ," MPRA Paper 19574, University Library of Munich, Germany, revised 01 Mar 2006.
  13. Philip Oreopoulos & Alan J. Auerbach, 1999. "Analyzing the Fiscal Impact of U.S. Immigration," American Economic Review, American Economic Association, American Economic Association, vol. 89(2), pages 176-180, May.
  14. John P. Martin & Edward R. Whitehouse, 2008. "Reforming Retirement-Income Systems: Lessons from the Recent Experiences of OECD Countries," OECD Social, Employment and Migration Working Papers 66, OECD Publishing.
  15. Jimeno, Juan F. & Rojas, Juan A. & Puente, Sergio, 2008. "Modelling the impact of aging on social security expenditures," Economic Modelling, Elsevier, Elsevier, vol. 25(2), pages 201-224, March.
  16. Javier Alonso Meseguer & José A. Herce, . "Balance del sistema de pensiones y boom migratorio en España. Proyecciones del modelo MODPENS de FEDEA a 2050," Working Papers 2003-02, FEDEA.
  17. David E. Bloom & David Canning & Jaypee Sevilla, 2001. "Economic Growth and the Demographic Transition," NBER Working Papers 8685, National Bureau of Economic Research, Inc.
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