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Pension Reform during the Demographic Transition

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  • Hans Fehr

Abstract

The aim of this paper is to quantify the welfare effects of some currently discussed pension reform proposals in Germany. The analysis is based on an extended overlapping‐generations model which accounts for intra‐generational heterogeneity, rising life expectancy and declining fertility. Given a baseline path of the economy under the existing unfunded pension system, the model calculates the macroeconomic impact as well as the distributional and efficiency effects of various pension reform measures aimed at reducing the level of the future unfunded pension system. Simulations reveal that pension reforms cannot be evaluated solely in terms of inter‐ and intra‐generational equity. Substantial efficiency gains or losses might arise if the linkage between contributions and benefits is improved or weakened.

Suggested Citation

  • Hans Fehr, 2000. "Pension Reform during the Demographic Transition," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(3), pages 419-443, September.
    • Handle: RePEc:bla:scandj:v:102:y:2000:i:3:p:419-443
    DOI: 10.1111/1467-9442.03206
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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