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Volatility of Social Security Wealth: Political Risks of Benefit-Rule Changes in Germany

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  • Christoph Borgmann
  • Matthias Heidler

Abstract

We address the question of how the generosity of the German public pension systems' benefit rule has changed during the past three decades. In order to do so, we firstly outline the social security reforms of the past 50 years. Then, we illustrate political risk by measuring the volatility of social security wealth induced by the legislative benefit rule changes. Our results show that the standard deviation resulting in the scenarios and cohorts considered is well over 10%. Furthermore, it turns out that the gross social security wealth can be subject to losses between 30% and 60% over the life cycle.

Suggested Citation

  • Christoph Borgmann & Matthias Heidler, 2007. "Volatility of Social Security Wealth: Political Risks of Benefit-Rule Changes in Germany," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 63(1), pages 83-106, March.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200703)63:1_83:vosswp_2.0.tx_2-o
    DOI: 10.1628/001522107X186737
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    Cited by:

    1. Sierminska, Eva & Wroński, Marcin, 2022. "Inequality and Public Pension Entitlements," GLO Discussion Paper Series 1212, Global Labor Organization (GLO).
    2. Wörz, Markus, 2011. "Old-age provisions in Germany: Changes in the retirement system since the 1980s," Discussion Papers, Research Unit: Inequality and Social Integration SP I 2011-208, WZB Berlin Social Science Center.
    3. Wroński, Marcin, 2023. "The impact of social security wealth on the distribution of wealth in the European Union," The Journal of the Economics of Ageing, Elsevier, vol. 24(C).
    4. Erzo F. P. Luttmer & Andrew A. Samwick, 2018. "The Welfare Cost of Perceived Policy Uncertainty: Evidence from Social Security," American Economic Review, American Economic Association, vol. 108(2), pages 275-307, February.

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    More about this item

    Keywords

    social security wealth; political risk; Germany;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

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