A Blue Print For Germany’s Pension Reform
Germany relies almost exclusively on a public pay-as-you-go pension system for old-age in-come provision. This mandatory “retirement insurance” has become under severe pressure, mainly from population aging and from incentive effects that have reduced labor supply. This paper argues Germany needs a pension reform with three main elements: (1) A reformed pay-as-you-go pillar which is actuarially fair, features a transparent notional account set-up, and freezes contribution rates at the current level; (2) A second funded pillar which is based on US 401(k)-style grouped accounts that finance the impending aging burden; (3) Augmented by redistributive features that guarantee a minimum pension and strengthen human capital formation. The paper briefly discusses the sources of the current problems, details the reform proposal, in particular the cohort- and time-varying transition burden which turns out to be rather moderate, and sheds light on the side effects of such a transition on the German macro economy which are more subtle than is often claimed.
|Date of creation:||10 Jan 2002|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.mea.mpisoc.mpg.de/
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Martin Feldstein, 1998. "Privatizing Social Security," NBER Books, National Bureau of Economic Research, Inc, number feld98-1.
- Walliser, Jan & Winter, Joachim, 1998. "Tax incentives, bequest motives and the demand for life insurance: evidence from Germany," Sonderforschungsbereich 504 Publications 99-28, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
- Robert Holzmann, 1996.
"Pension Reform, Financial Market Development, and Economic Growth; Preliminary Evidence From Chile,"
IMF Working Papers
96/94, International Monetary Fund.
- Robert Holzmann, 1997. "Pension Reform, Financial Market Development, and Economic Growth: Preliminary Evidence from Chile," IMF Staff Papers, Palgrave Macmillan, vol. 44(2), pages 149-178, June.
- Borsch-Supan, Axel & Schnabel, Reinhold, 1998. "Social Security and Declining Labor-Force Participation in Germany," American Economic Review, American Economic Association, vol. 88(2), pages 173-78, May.
- Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
- Corsetti, Giancarlo & Schmidt-Hebbel, Klaus, 1995. "Pension reform and growth," Policy Research Working Paper Series 1471, The World Bank.
- Sikandar Siddiqui, 1997. "The pension incentive to retire: Empirical evidence for West Germany," Journal of Population Economics, Springer, vol. 10(4), pages 463-486.
- Axel Borsch-Supan, 1998. "Incentive Effects of Social Security on Labor Force Participation: Evidence in Germany and Across Europe," NBER Working Papers 6780, National Bureau of Economic Research, Inc.
- Börsch-Supan, Axel, 1998. "Incentive Effects of Social Security on Labor Force Participation: Evidence in Germany and Across Europe," Sonderforschungsbereich 504 Publications 98-29, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
- Pestieau, Pierre & Possen, Uri M., 2000.
"Investing Social Security in the Equity Market. Does it Make a Difference?,"
National Tax Journal,
National Tax Association, vol. 53(n. 1), pages 41-58, March.
- PESTIEAU, Pierre & POSSEN, Uri M., . "Investing social security in the equity market. Does it make a difference?," CORE Discussion Papers RP -1444, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Brunner, Johann K., 1993. "Redistribution and the efficiency of the pay-as-you-go pension system," Discussion Papers, Series I 265, University of Konstanz, Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:mea:meawpa:02002. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Henning Frankenberger)
If references are entirely missing, you can add them using this form.