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Coping with Spain's aging: retirement rules and incentives

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  • CATALÁN, MARIO
  • GUAJARDO, JAIME
  • HOFFMAISTER, ALEXANDER W.

Abstract

This paper evaluates the macroeconomic and welfare effects of extending the averaging period used to calculate pension benefits in a pay-as-you-go system. It also examines the complementarities between reforms extending the averaging period and those increasing the retirement age under alternative tax policies. The analysis applies a model in the Auerbach-Kotlikoff tradition to the Spanish economy. Extending the averaging period to the entire work life maximizes long-run welfare and limits expenditure pressures at the peak of the demographic shock as much as increasing the retirement age in line with life expectancy. Moreover, during the demographic transition, pension reforms induce intertemporal labor substitution effects that engender aggregate labor cycles.

Suggested Citation

  • Catalán, Mario & Guajardo, Jaime & Hoffmaister, Alexander W., 2010. "Coping with Spain's aging: retirement rules and incentives," Journal of Pension Economics and Finance, Cambridge University Press, vol. 9(4), pages 549-581, October.
    • Handle: RePEc:cup:jpenef:v:9:y:2010:i:04:p:549-581_99
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    Cited by:

    1. Jan Babecky & Kamil Dybczak, 2009. "The Impact of Population Ageing on the Czech Economy," Working Papers 2009/1, Czech National Bank, Research and Statistics Department.
    2. Mr. Mario Catalan & Mr. Nicolas E Magud, 2012. "A Tradeoff between the Output and Current Account Effects of Pension Reform," IMF Working Papers 2012/283, International Monetary Fund.
    3. Hans FEHR, 2010. "Pension Reform with Variable Retirment Age," EcoMod2010 259600055, EcoMod.
    4. Börsch-Supan, Axel & Härtl, Klaus & Leite, Duarte & Ludwig, Alexander, 2018. "Endogenous retirement behavior of heterogeneous households under pension reforms," SAFE Working Paper Series 221, Leibniz Institute for Financial Research SAFE.
    5. Mario Catalán & Nicolas E. Magud, 2017. "A Tradeoff between the Output and Net Foreign Asset Effects of Pension Reform," Open Economies Review, Springer, vol. 28(4), pages 685-709, September.
    6. Andras Simonovits, 2012. "Pension Reforms in an Aging Society: A Fully Displayed Cohort Model," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 4, pages 1-30, December.

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