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When will the Germans Get Trapped in their Pension System?

Author

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  • Silke Übelmesser
  • Hans-Werner Sinn

Abstract

The upcoming demographic crisis in Germany demands fundamental reforms of the pension system. In a democracy, reforms are, however, only feasible when they are supported by the majority of the electorate. To determine 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 cohort which is not affected by the reform and the "median age" as the age of the politically decisive cohort. Until 2023, the median age is below the indifference age implying that the young have the majority and the reform can be democratically enforced. After 2023, Germany will be characterized by a gerontocratic system where the old decide over the young. Only the fear that the young might emigrate − and perhaps a certain altruistic attitude towards their own descendants − will prevent the old from exploiting the young.

Suggested Citation

  • Silke Übelmesser & Hans-Werner Sinn, 2001. "When will the Germans Get Trapped in their Pension System?," CESifo Working Paper Series 561, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_561
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    References listed on IDEAS

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    1. 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.
    2. 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.
    3. Hans-Werner Sinn & Martin Werding, 2000. "Rentenniveausenkung und Teilkapitaldeckung - ifo Empfehlungen zur Konsolidierung des Umlageverfahrens," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 53(18), pages 12-25, June.
    4. Hans-Werner Sinn & Silke Übelmesser, 2000. "Wann kippt Deutschland um?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 53(28-29), pages 20-25, November.
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    11. Hirte Georg, 1999. "Raising the Retirement Age – Why Should Anybody Lose? / Anhebung des Rentenzugangsalters – Muss es Verlierer geben?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 219(3-4), pages 393-408, June.
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    Cited by:

    1. Ehrentraut, Oliver & Raffelhüschen, Bernd, 2003. "Die Rentenversicherung unter Reformdruck: Ein Drama in drei Akten," Discussion Papers 109, Albert-Ludwigs-Universität Freiburg, Institut für Finanzwissenschaft.

    More about this item

    Keywords

    demographic crisis; pension reform; political feasibility; median age; indifference age;

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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