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

  • Christoph Borgmann
  • Matthias Heidler
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    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.

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    File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2003/wp-cesifo-2003-08/cesifo1_wp1021.pdf
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    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1021.

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    Date of creation: 2003
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    Handle: RePEc:ces:ceswps:_1021
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    1. 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.
    2. David Bradford, 1991. "Tax Policy and the Economy, Volume 5," NBER Books, National Bureau of Economic Research, Inc, number brad91-1, April.
    3. Martin Werding, 2000. "Rentenreform: Modellrechnungen zu den langfristigen Effekten," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 53(28-29), pages 39-42, November.
    4. Sinn, Hans-Werner, 1999. "Gesetzliche Rentenversicherung: Prognosen im Vergleich," Munich Reprints in Economics 19871, University of Munich, Department of Economics.
    5. Galasso, Vincenzo & Profeta, Paola, 2002. "The political economy of social security: a survey," European Journal of Political Economy, Elsevier, vol. 18(1), pages 1-29, March.
    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 303-18.
    7. Razin, A. & Sadka, E. & Swagel, P., 2000. "The Aging Population and the Size of the Welfare State," Papers 2000-23, Tel Aviv.
    8. Jonathan Gruber & David A. Wise, 1999. "Social Security and Retirement around the World," NBER Books, National Bureau of Economic Research, Inc, number grub99-1, April.
    9. 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.
    10. John McHale, 1999. "The Risk of Social Security Benefit Rule Changes: Some International Evidence," NBER Working Papers 7031, National Bureau of Economic Research, Inc.
    11. Bonin, Holger, 2001. "Will it Last? An Assessment of the 2001 German Pension Reform," IZA Discussion Papers 343, Institute for the Study of Labor (IZA).
    12. John Y. Campbell & Martin Feldstein, 2001. "Risk Aspects of Investment-Based Social Security Reform," NBER Books, National Bureau of Economic Research, Inc, number camp01-1, April.
    13. 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.
    14. Phillip Swagel & Efraim Sadka & Assaf Razin, 2002. "The Aging of the Population and the Size of the Welfare State," IMF Working Papers 02/68, International Monetary Fund.
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