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The future of Spanish pensions

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  • DÍAZ-GIMÉNEZ, JAVIER
  • DÍAZ-SAAVEDRA, JULIÁN

Abstract

We use an overlapping generations model economy with endogenous retirement to study the 2011 and 2013 reforms of the Spanish public pension system. We nd that this latest reforms, which extend the number of years os contributions used to compute the pensions, delay the retirement ages, introduce two sustainability factors, and e ectively transform the Spanish pay-as-yougo system into a de ned-contribution system, succeed in making Spanish pensions sustainable until 2037, but they fail to do so afterwards. The success until 2037 is achieved reducing the real value of the average pension and leaving the many loopholes of the contributivity and the transparency of the system unchanged. This reduction in pensions is progressive and, by 2037, the average pension will be approximately 20 percent smaller in real terms than what it would have been under the pension rules prevailing in 2010. The 2013 pension reform fails after 2037 because, from that year onwards, approximately 50 percent of the Spanish retirees will be paid the minimum pension, which is exempt from the sustainability factors. We conjecture that further reforms lurk in the future of Spanish pensions.
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Suggested Citation

  • 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.
  • Handle: RePEc:cup:jpenef:v:16:y:2017:i:02:p:233-265_00
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    References listed on IDEAS

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    1. Rojas, Juan A., 2005. "Life-cycle earnings, cohort size effects and social security: a quantitative exploration," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 465-485, February.
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    Cited by:

    1. 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.

    More about this item

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • 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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