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When Will the Germans Get Trapped in their Pension System?

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  • Hans-Werner Sinn
  • Silke Uebelmesser

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.

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  • Hans-Werner Sinn & Silke Uebelmesser, 2001. "When Will the Germans Get Trapped in their Pension System?," NBER Working Papers 8503, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:8503
    Note: AG PE
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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.

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    JEL classification:

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

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