A Projection Model of the Contributory Pension Expenditure of the Spanish Social Security System: 2004-50

Abstract

The need for long-term fiscal projections is self evident. Of these projections, pension expenditure is one of the most important since firstly it represents a large share of total expenditure, and secondly because of the positive correlation between this variable and demographic change. In this paper, we develop a model to project contributory pension expenditures in the Spanish Social Security System disaggregating the results by pension category and sex. The most salient of the results obtained is the expected steady growth of total expenditure in contributory pensions. This would lie around 15% of GDP around 2045 compared to its initial level of barely 8%. By pension categories, retirement pensions are those that determine the tendency of total expenditure evolution. Interesting conclusions can also be extracted from the analysis by sex. For instance, contrary to what one could expect, the projection shows a higher growth of the number of contributory pensions accruing to men.

Keywords: Pensions system, sustainability, public expenditure

JEL Classification: E62, H55