Aging and the Financing of Social Security in Switzerland

50 Pages Posted: 17 Oct 2010

See all articles by Christian Keuschnigg

Christian Keuschnigg

University of St. Gallen – Department of Economics (FGN-HSG); CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Mirela Keuschnigg

University of St. Gallen - SEPS: Economics and Political Sciences

Christian Jaag

Swiss Economics; University of St. Gallen - Institute of Public Finance and Fiscal Law

Date Written: August 16, 2010

Abstract

Demographic projections forecast a doubling of the dependency ratio until 2050 as well as an increase of 10% in population due to longer life expectancy in Switzerland. To quantify the effects on social security and public finances, we use a computational overlapping generations model with five margins of labor supply: labor market participation, hours worked, job search, retirement, and on-the-job training. Starting with a passive fiscal strategy, we find that aging might reduce per capita income by 20 percent and necessitate a long-run increase of wage taxes and social security contributions by 21 percentage points. A comprehensive reform package, including an increase in the effective retirement age to 68 years and several other measures, may limit the tax increases to 4 percentage points of value added tax and reduce the decline of per capita income to less than 6%.

Keywords: aging, social security, retirement, human capital, unemployment

JEL Classification: D58, D91, H55, J26, J64

Suggested Citation

Keuschnigg, Christian and Keuschnigg, Mirela and Jaag, Christian Yvo, Aging and the Financing of Social Security in Switzerland (August 16, 2010). Netspar Discussion Paper No. 08/2010-032. Available at SSRN: https://ssrn.com/abstract=1692725 or http://dx.doi.org/10.2139/ssrn.1692725

Christian Keuschnigg (Contact Author)

University of St. Gallen – Department of Economics (FGN-HSG) ( email )

Varnbuelstrasse 19
St. Gallen, 9000
Switzerland

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Mirela Keuschnigg

University of St. Gallen - SEPS: Economics and Political Sciences ( email )

University of St. Gallen
St. Gallen, CH-9000
Switzerland

Christian Yvo Jaag

Swiss Economics ( email )

Stampfenbachstr. 142
Zurich, CH-8006
Switzerland

University of St. Gallen - Institute of Public Finance and Fiscal Law ( email )

Rosenbergstrasse 51
St. Gallen, St. Gallen CH-9000
Switzerland

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
43
Abstract Views
783
PlumX Metrics