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Spanish pension system: Population aging and immigration policy

Author

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  • Javier Vazquez Grenno

    (Universidad de Barcelona & Institut d’Economia de Barcelona)

Abstract

There is a widespread consensus in the literature that, as a consequence of the demographic transition, the current Spanish pension systemwill become unsustainable in the decades coming. In this article we evaluate the sustainability of the contributory pension sub-system, taking into account the demographic projections by the Spanish Statistical Office (INE). A baseline scenario is projected as well as several reforms are simulated, focusing on: (i) an immigration policy, (ii) changes in the way of adjusting the pensions and (iii) increase of the legal age of retirement up to 68. Themain results are the following. The current systemwill not incur deficits until 2022, fromthis point onwards deficits will begin to be accumulated. The expenditure on pensions in terms of GDP will increased from 8.3% in 2009 to 17.0% in 2049. An immigration policy –aimed at foreign young people– would help, but would not ensure the long-term sustainability of the current system. A policy that combines pension 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 2028.

Suggested Citation

  • Javier Vazquez Grenno, 2010. "Spanish pension system: Population aging and immigration policy," Hacienda Pública Española, IEF, vol. 195(4), pages 37-64, december.
  • Handle: RePEc:hpe:journl:y:2010:v:195:i:4:p:37-64
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    References listed on IDEAS

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    More about this item

    Keywords

    Immigration policy; public pensions; fiscal sustainability.;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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