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The Impact of Demographic Change on Social Security Financing

Author

Listed:
  • William A. Halter

    (International Monetary Fund)

  • Richard Hemming

    (International Monetary Fund)

Abstract

The relationship between prospective demographic changes and social security tax rates over the long term is examined for four countries--the Federal Republic of Germany, Japan, the United Kingdom, and the United States. Through use of a simple projection model it is shown that, without significant reform, social security programs as constituted in 1980 would have implied substantial increases in social security tax rates by the year 2025 in all four countries. The model is then used to explore how a range of policy options would affect the evolution of tax rates. Recent policy measures taken in each of the countries can be summarized in terms of the model, and it is shown that these measures lead to markedly lower tax rates than with unreformed programs, although the tax rate in Germany will remain high.

Suggested Citation

  • William A. Halter & Richard Hemming, 1987. "The Impact of Demographic Change on Social Security Financing," IMF Staff Papers, Palgrave Macmillan, vol. 34(3), pages 471-502, September.
    • Handle: RePEc:pal:imfstp:v:34:y:1987:i:3:p:471-502
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    Cited by:

    1. Patxot, Concepció & Rentería, Elisenda & Souto, Guadalupe, 2015. "Can we keep the pre-crisis living standards? An analysis based on NTA profiles in Spain," The Journal of the Economics of Ageing, Elsevier, vol. 5(C), pages 54-62.
    2. Zakir Husain & Mousumi Dutta & Nidhi Chowdhary, 2014. "Is Health Wealth? Results of a Panel Data Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 117(1), pages 121-143, May.
    3. Jorge Soares, 2011. "Social Security: Universal vs. Earnings-Dependent Benefits," Working Papers 11-14, University of Delaware, Department of Economics.
    4. Kenc, Turalay & Sayan, Serdar, 2001. "Demographic shock transmission from large to small countries: An overlapping generations CGE analysis," Journal of Policy Modeling, Elsevier, vol. 23(6), pages 677-702, August.
    5. Grech, Aaron George, 1999. "Funded pension schemes: Economic effects and policy implications," MPRA Paper 33615, University Library of Munich, Germany.
    6. van Dalen, Hendrik P., 1996. "Pitfalls in the economic analysis of aging," Journal of Policy Modeling, Elsevier, vol. 18(2), pages 157-184, April.
    7. Palacios,Robert J., 1996. "Averting the old-age crisis : technical annex," Policy Research Working Paper Series 1572, The World Bank.
    8. Sayan, Serdar & Kiraci, Arzdar, 2001. "Parametric pension reform with higher retirement ages: A computational investigation of alternatives for a pay-as-you-go-based pension system," Journal of Economic Dynamics and Control, Elsevier, vol. 25(6-7), pages 951-966, June.
    9. Keith M. Carlson, 1991. "The future of Social Security: an update," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 33-49.
    10. Jorge Soares, "undated". "Altruism and Self-interest in a Political Economy of Public Education," Working Papers 130, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.

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