Download This PaperLong-term Outlook for the German Statutory Pension System
48 Pages Posted: 21 Apr 2020
Date Written: April 20, 2020
Abstract
This paper presents long term projections of the German pension system that are based on a general equilibrium model with overlapping generations (OLG). This framework takes into account the two way feedback of both micro and macroeconomic relationships, meaning that households, for example, react to changes in the statutory pension system, such as the retirement age or the replacement rate. Changes in households' behaviour, in turn, impact on macroeconomic developments and public finances. One approach to parametrically reform the pension system would be linking (indexing) the retirement age systematically to increasing life expectancy. The model shows that the resulting increase in employment would also bolster social security contributions and taxes. Moreover, with a rising retirement age and the associated longer periods of work, pension entitlements would increase.
Keywords: Demographic Change, Pension System, OLG Models
JEL Classification: E27, E62, H55, J11, J26
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