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

  • Fernandez, Juan J.
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    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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    File URL: http://econstor.eu/bitstream/10419/43293/1/63564598X.pdf
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    Paper provided by Max Planck Institute for the Study of Societies in its series MPIfG Discussion Paper with number 10/9.

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    Date of creation: 2010
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    Handle: RePEc:zbw:mpifgd:109
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    1. Peter Whiteford & Edward Whitehouse, 2006. "Pension Challenges and Pension Reforms in Oecd Countries," Oxford Review of Economic Policy, Oxford University Press, vol. 22(1), pages 78-94, Spring.
    2. Mark Mink & Jakob de Haan, 2006. "Are there Political Budget Cycles in the Euro Area?," European Union Politics, , vol. 7(2), pages 191-211, June.
    3. Kenneth Rogoff & Anne Sibert, 1986. "Elections and Macroeconomic Policy Cycles," NBER Working Papers 1838, National Bureau of Economic Research, Inc.
    4. Lyle Scruggs, 2006. "The Generosity of Social Insurance, 1971--2002," Oxford Review of Economic Policy, Oxford University Press, vol. 22(3), pages 349-364, Autumn.
    5. Sheetal K. Chand & Albert Jaeger, 1996. "Aging Populations and Public Pension Schemes," IMF Occasional Papers 147, International Monetary Fund.
    6. John McHale, 2001. "The Risk of Social Security Benefit-Rule Changes: Some International Evidence," NBER Chapters, in: Risk Aspects of Investment-Based Social Security Reform, pages 247-290 National Bureau of Economic Research, Inc.
    7. Andrea Boltho & Andrew Glyn, 2006. "Prudence or Profligacy: Deficits, Debt, and Fiscal Consolidation," Oxford Review of Economic Policy, Oxford University Press, vol. 22(3), pages 411-425, Autumn.
    8. Fair, Ray C, 1978. "The Effect of Economic Events on Votes for President," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 159-73, May.
    9. Kittel, Bernhard & Obinger, Herbert, 2002. "Political parties, institutions, and the dynamics of social expenditure in times of austerity," MPIfG Discussion Paper 02/1, Max Planck Institute for the Study of Societies.
    10. repec:cup:cbooks:9780521529167 is not listed on IDEAS
    11. Mario Cleves & William W. Gould & Roberto G. Gutierrez & Yulia Marchenko, 2010. "An Introduction to Survival Analysis Using Stata," Stata Press books, StataCorp LP, edition 3, number saus3, November.
    12. Nannestad, Peter & Paldam, Martin, 1994. " The VP-Function: A Survey of the Literature on Vote and Popularity Functions after 25 Years," Public Choice, Springer, vol. 79(3-4), pages 213-45, June.
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