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Postponing Retirement: the Political Push of Aging

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Conventional economic wisdom suggests because of the aging process, social security systems will have to be retrenched. In particular, retirement age will have to be largely increased. Yet, is this policy measure feasible in OECD countries? Since the answer belongs mainly to the realm of politics, I evaluate the political feasibility of postponing retirement under aging in France, Italy, the UK, and the US. Simulations for the year 2050 steady state demographic, economic and political scenario suggest that retirement age will be postponed in all countries, while the social security contribution rate will rise in all countries, but Italy. The political support for increasing the retirement age stems mainly from the negative income effect induced by aging, which reduces the profitability of the existing social security system, and thus the individuals net social security wealth.

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  • Vincenzo Galasso, 2006. "Postponing Retirement: the Political Push of Aging," CSEF Working Papers 164, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  • Handle: RePEc:sef:csefwp:164
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    1. Cremer, Helmuth & Pestieau, Pierre, 2000. "Reforming our pension system: Is it a demographic, financial or political problem?," European Economic Review, Elsevier, vol. 44(4-6), pages 974-983, May.
    2. Cremer, Helmuth & Pestieau, Pierre, 2003. "The Double Dividend of Postponing Retirement," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(4), pages 419-434, August.
    3. Georges Casamatta & Helmuth Cremer & Pierre Pestieau, 2005. "Voting on Pensions with Endogenous Retirement Age," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(1), pages 7-28, January.
    4. Sveinbjörn Blöndal & Stefano Scarpetta, 1999. "The Retirement Decision in OECD Countries," OECD Economics Department Working Papers 202, OECD Publishing.
    5. Conde-Ruiz, J. Ignacio & Galasso, Vincenzo, 2004. "The macroeconomics of early retirement," Journal of Public Economics, Elsevier, pages 1849-1869.
    6. J. Ignacio Conde-Ruiz & Vincenzo Galasso, 2003. "Early Retirement," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 12-36, January.
    7. Galasso, Vincenzo & Profeta, Paola, 2007. "How does ageing affect the welfare state?," European Journal of Political Economy, Elsevier, vol. 23(2), pages 554-563, June.
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    11. Vincenzo Galasso, 2008. "The Political Future of Social Security in Aging Societies," MIT Press Books, The MIT Press, edition 1, volume 1, number 026257246x, January.
    12. J. Ignacio Conde-Ruiz & Vincenzo Galasso & Paola Profeta, 2005. "Early Retirement and Social Security: A Long Term Perspective," CESifo Working Paper Series 1571, CESifo Group Munich.
    13. Tito Boeri & Axel Boersch-Supan & Guido Tabellini, 2002. "Pension Reforms and the Opinions of European Citizens," American Economic Review, American Economic Association, vol. 92(2), pages 396-401, May.
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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs

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