Optimal Response to a Demographic Shock

Juan Carlos Conesa and Carlos Garriga ()

No 1393, CESifo Working Paper Series from CESifo

Abstract: We examine the optimal policy response to an exogenously given demographic shock. Such a shock affects negatively the financing of retirement pensions, and we use optimal fiscal policy in order to determine the optimal strategy of the social security administration. Our approach provides specific policy responses in an environment that guarantees the financial sustainability of existing retirement pensions. At the same time, pensions will be financed in a way that by construction generates no welfare losses for any of the cohorts in our economy. In contrast to existing literature we endogenously determine optimal policies rather than exploring implications of exogenously given policies. Our results show that the optimal strategy is based in the following ingredients: elimination of compulsory retirement, a change in the structure of labor income taxation and a temporary increase in the level of government debt.

Date: 2005
New Economics Papers: this item is included in nep-dge, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp1393.pdf (application/pdf)

Related works:
Working Paper: Optimal Response to a Demographic Shock (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_1393

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().