Is GDP growth necessary to maintain pensions? An empirical analysis of public pension spending and benefits in the OECD

David Palomera and Peter Starke

No 01/2026, Working Paper Series from Post-Growth Economics Network (PEN)

Abstract: The literature on growth dependencies increasingly calls for post-growth welfare states capable of functioning without reliance on GDP growth in order to remain within planetary limits. Yet empirical research on the relationship between welfare state arrangements and economic growth remains remarkably scarce, even in policy domains where growth dependence appears most plausible, such as pensions. Using panel data of 20 OECD countries from 1971 to 2022, we examine the relationship between public pension spending per capita and replacement rates (i.e. benefit generosity) on the one hand, and GDP per capita on the other. We find that while pension spending per capita remains partially coupled to GDP, pension replacement rates have become decoupled - and in many instances negatively coupled - already at relatively modest income levels. This is consistent with the literature on the social limits to growth, where decoupling likewise occurs at modest income levels. We find that labor-market factors - especially labor participation - are consistently and strongly associated with higher pension benefits. These findings have important policy implications, highlighting that the sustainability of pension systems in post-growth contexts may depend less on infinite economic expansion than on institutional and labor-market policy choices.

Keywords: welfare state; pensions; post-growth; degrowth; sustainable welfare; growth dependence; decoupling (search for similar items in EconPapers)
Date: 2026
New Economics Papers: this item is included in nep-age and nep-pbe
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