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When will the Germans Get Trapped in their Pension System?

  • Silke Uebelmesser
  • Hans-Werner Sinn

The upcoming demographic crisis in Germany demands fundamentalreforms of the pension system. In a democracy, reforms are, however, onlyfeasible when they are supported by the majority of the electorate. Todetermine whether the majority is in favor of reforms of the pension system,we calculate for each year the "indifference age" as the age of the cohortwhich is not affected by the reform and the "median age" as the age of thepolitically decisive cohort. Until 2023, the median age is below theindifference age implying that the young have the majority and the reformcan be democratically enforced. After 2023, Germany will be characterizedby a gerontocratic system where the old decide over the young. Only the fearthat the young might emigrate – and perhaps a certain altruistic attitudetowards their own descendants – will prevent the old from exploiting theyoung.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 561.

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Date of creation: 2001
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Handle: RePEc:ces:ceswps:_561
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  1. Myles,Gareth D., 1995. "Public Economics," Cambridge Books, Cambridge University Press, number 9780521497695.
  2. Hans-Werner Sinn & Martin Werding, 2000. "Rentenniveausenkung und Teilkapitaldeckung - ifo Empfehlungen zur Konsolidierung des Umlageverfahrens," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 53(18), pages 12-25, 06.
  3. Marcel Thum & Jakob von Weisäcker, 2000. "Implizite Einkommensteuer als Messlatte für die aktuellen Rentenreformvorschläge," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 1(4), pages 453-468, November.
  4. Breyer, Friedrich, 1994. "The political economy of intergenerational redistribution," European Journal of Political Economy, Elsevier, vol. 10(1), pages 61-84, May.
  5. Georg Hirte, 1999. "Raising the Retirement Age--Why Should Anybody Lose?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 219(3+4), pages 393-408, September.
  6. Browning, Edgar K, 1975. "Why the Social Insurance Budget Is Too Large in a Democracy," Economic Inquiry, Western Economic Association International, vol. 13(3), pages 373-88, September.
  7. Hans-Werner Sinn & Silke Übelmesser, 2000. "Wann kippt Deutschland um?," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 53(28-29), pages 20-25, November.
  8. Vincenzo Galasso, 1999. "The US Social Security System: What Does Political Sustainability Imply?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 698-730, July.
  9. Fehr, Hans, 1999. "Pension reform during the demographic transition," W.E.P. - Würzburg Economic Papers 8, University of Würzburg, Chair for Monetary Policy and International Economics.
  10. Hans-Werner Sinn & Marcel Thum, 1999. "Gesetzliche Rentenversicherung: Prognosen im Vergleich," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 56(1), pages 104-140, March.
  11. Butler, Monika, 2000. "The political feasibility of pension reform options: the case of Switzerland," Journal of Public Economics, Elsevier, vol. 75(3), pages 389-416, March.
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