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The financial impact of Spanish pension reform: A quick estimate

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  • DE LA FUENTE, ANGEL
  • DOMÉNECH, RAFAEL

Abstract

In this paper we present a preliminary estimate of the financial impact of the recent reform of the Spanish pension system. After updating the projections of pension expenditure constructed in de la Fuente and Domenech (2010) for the period 2008-60, we analyze the impact on this variable of raising the retirement age from 65 to 67 years, extending from 15 to 25 years the period over which wages are averaged to calculate the starting pension and increasing from 35 to 37 the number of contribution years required to obtain a \"full pension.\" Conditional on a series of assumptions about the evolution of employment, productivity and demographics, our estimates suggest that these measures will reduce pension expenditure by up to 1.4 percentage points of GDP once the reforms have been fully implemented in 2027, thereby stabilizing pension expenditure at a bit over 9% of GDP during the transition period and preventing the emergence of a structural deficit in the system before the end of the next decade. On the other hand, the existing uncertainty about the future evolution of the relevant variables suggests that it would be desirable to bring forward in time the introduction of the periodic evaluation of the system (the so-called sustainability factor) so as to have in place a mechanism that can be used to modulate the rhythm and scope of the reform if the system\'s financial situation requires it before the end of the transitional period.
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Suggested Citation

  • De La Fuente, Angel & Doménech, Rafael, 2013. "The financial impact of Spanish pension reform: A quick estimate," Journal of Pension Economics and Finance, Cambridge University Press, vol. 12(01), pages 111-137, January.
  • Handle: RePEc:cup:jpenef:v:12:y:2013:i:01:p:111-137_00
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    References listed on IDEAS

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    1. Angel De la Fuente & Jose Emilio Bosca, 2011. "Gasto educativo por regiones y niveles en 2005," Working Papers 1119, BBVA Bank, Economic Research Department.
    2. Alicia García-Herrero & KC Fung & Nathalie Aminian & Francis Ng, 2012. "Trade in services: East Asian and Latin American Experiences," Working Papers 1204, BBVA Bank, Economic Research Department.
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    Cited by:

    1. Angel de la Fuente, 2015. "A Simple Model of Aggregate Pension Expenditure," Hacienda Pública Española, IEF, vol. 212(1), pages 13-50, March.
    2. Díaz-Giménez, Javier & Díaz-Saavedra, Julián, 2017. "The future of Spanish pensions," Journal of Pension Economics and Finance, Cambridge University Press, vol. 16(02), pages 233-265, April.
    3. Javier Diaz Gimenez & Javier Diaz Jimenez, 2015. "Spanish Minimum Pensions after the 2013 Pension Reform," ThE Papers 15/04, Department of Economic Theory and Economic History of the University of Granada..
    4. Alfonso Sánchez-Martin & J. García-Pérez & Sergi Jiménez-Martín, 2014. "Delaying the Normal and Early Retirement Ages in Spain: Behavioural and Welfare Consequences for Employed and Unemployed Workers," De Economist, Springer, vol. 162(4), pages 341-375, December.
    5. Alassane Diaw, 2017. "Retirement Preparedness in Saudi Arabia," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 78-86.
    6. J. Ignacio Conde-Ruiz & Clara I. González, 2016. "From Bismarck to Beveridge: the other pension reform in Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 7(4), pages 461-490, November.
    7. Santacruz Cano, Javier & Bernal Alonso, Miguel Ángel, 2015. "Efficiency in Pension Funds Management in a QE Environment: The Case of Spain/Eficiencia en la gestión de los fondos de pensiones en un entorno de QE: El caso de España," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 33, pages 687-700, Septiembr.
    8. J. Ignacio Conde-Ruiz & Clara I. González, 2013. "Reforma de pensiones 2011 en España," Hacienda Pública Española, IEF, vol. 204(1), pages 9-44, March.
    9. J. Ignacio Conde-Ruiz & Clara I. González, 2015. "Challenges for Spanish Pensions in the Early 21st Century," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(2), pages 20-24, 08.
    10. repec:ces:ifodic:v:13:y:2015:i:2:p:19166291 is not listed on IDEAS

    More about this item

    JEL classification:

    • 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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