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Economic crises, high public pension spending and blame-avoidance strategies: Pension policy retrenchments in 14 social-insurance countries, 1981 - 2005

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  • Fernandez, Juan J.

Abstract

This paper examines the determinants of the timing of public pension policy retrenchments in 14 affluent democracies. Available research does not satisfactorily capture the multidimensionality of these legislative events, because it relies on indicators of pension policy provisions for current pensioners even though recent retrenchment pension reforms have been characterized by phased-in or grandfathering measures. Instead, this paper identifies these events by considering the individual long-term implications of each pension reform passed in 14 OECD social-insurance countries between 1981 and 2005. Based on a synthetic review of the pension policy literature, data from financial projections, and principles from the economics of welfare programs, I identify 62 pension retrenchments passed in these countries. My argument is that macroeconomic conditions, size of public pension system, and stage in the electoral cycle shape the likelihood of pension retrenchments. Results obtained from conditional frailty models for recurrent and sequential events support this argument. The interval between pension retrenchments is shorter in countries with low economic growth and high public pension spending, as well as in countries in a post-election year.

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  • Fernandez, Juan J., 2010. "Economic crises, high public pension spending and blame-avoidance strategies: Pension policy retrenchments in 14 social-insurance countries, 1981 - 2005," MPIfG Discussion Paper 10/9, Max Planck Institute for the Study of Societies.
  • Handle: RePEc:zbw:mpifgd:109
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