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Coping with Spain's Aging: Retirement Rules and Incentives

Year: 2007

Type: article

Abstract: This paper evaluates the macroeconomic and welfare effects of extending the averaging period used to calculate pension benefits in a pay-as-you-go system. It also examines the complementarities between reforms extending the averaging period and those increasing the retirement age under alternative tax policies. The analysis applies a model in the Auerbach-Kotlikoff tradition to the Spanish economy. Extending the averaging period to the entire work life maximizes long-run welfare and limits expenditure pressures at the peak of the demographic shock as much as increasing the retirement age in line with life expectancy. Moreover, during the demographic transition, pension reforms induce intertemporal labor substitution effects that engender aggregate labor cycles.

Source: Journal of Pensions Economics and Finance

DOI: 10.2139/ssrn.995623

Authors: MARIO CATALÁN, JAIME GUAJARDO, ALEXANDER W. HOFFMAISTER

Institution: International Monetary Fund

Language: English

Topic: Financial Literacy, Pension, Retirement Analysis

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: green

OpenAlex ID: W2108794838

FWCI: 2.166

Cites: 18

Cited by: 14

Related to: 10