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Demographics and Volatile Social Security Wealth: Political Risks of Benefit Rule Changes in Germany

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  • Christoph Borgmann
  • Matthias Heidler

Abstract

In this paper we address the question how the generosity of the benefit rule of the German public pension system has changed during the past three decades and how this development can be explained by demographic changes. Firstly, we illustrate the political risk of benefit rule changes for individuals. We find that depending on the birth year and the considered scenario the relative losses vary between 30 and nearly 60 percent. Secondly, we estimate how demographic developments have triggered these changes in generosity. Our results suggest that future developments of the old-age dependency ratio have an influence on the determination of generosity.

Suggested Citation

  • Christoph Borgmann & Matthias Heidler, 2003. "Demographics and Volatile Social Security Wealth: Political Risks of Benefit Rule Changes in Germany," CESifo Working Paper Series 1021, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_1021
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    5. Sinn, Hans-Werner, 1998. "The Pay-As You-Go Pension System as a Fertility Insurance and Enforcement Device," CEPR Discussion Papers 2023, C.E.P.R. Discussion Papers.
    6. Auerbach, Alan J & Gokhale, Jagadeesh & Kotlikoff, Laurence J, 1992. " Generational Accounting: A New Approach to Understanding the Effects of Fiscal Policy on Saving," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(2), pages 303-318.
    7. Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1994. "Generational Accounting: A Meaningful Way to Evaluate Fiscal Policy," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 73-94, Winter.
    8. John McHale, 2001. "The Risk of Social Security Benefit-Rule Changes: Some International Evidence," NBER Chapters,in: Risk Aspects of Investment-Based Social Security Reform, pages 247-290 National Bureau of Economic Research, Inc.
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    11. Schnabel, Reinhold, 1997. "Rates of Return of the German Pay-As-You-Go Pension System," Sonderforschungsbereich 504 Publications 98-56, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
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    Cited by:

    1. Heidler, Matthias & Raffelhüschen, Bernd, 2005. "How risky is the German pension system? The volatility of the internal rates of return," FZG Discussion Papers 6, University of Freiburg, Research Center for Generational Contracts (FZG).
    2. Börsch-Supan, Axel, 2005. "Risiken im Lebenszyklus: Theorie und Evidenz," Sonderforschungsbereich 504 Publications 05-05, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    3. Börsch-Supan, Axel, 2005. "Risiken im Lebenszyklus : Theorie und Evidenz," Papers 05-05, Sonderforschungsbreich 504.
    4. Ehrentraut, Oliver & Raffelhüschen, Bernd, 2003. "Die Rentenversicherung unter Reformdruck: Ein Drama in drei Akten," Discussion Papers 109, Albert-Ludwigs-Universität Freiburg, Institut für Finanzwissenschaft.
    5. Axel Börsch-Supan & Anette Reil-Held & Christina Benita Wilke, 2003. "How to make a Defined Benefit System Sustainable: The Sustainability Factor in the German Benefit Indexation Formula," MEA discussion paper series 03037, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.

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    Keywords

    social security wealth; demography; political economy; Germany;

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