Population Aging, Social Security and Fiscal Limits

Burkhard Heer, Vito Polito, Michael Wickens and Michael R. Wickens

No 7121, CESifo Working Paper Series from CESifo

Abstract: We study the sustainability of pension systems using a life-cycle model with distortionary taxation that sets an upper limit to the real value of tax revenues. This limit implies an endogenous threshold dependency ratio, i.e. a point in the cross-section distribution of the population beyond which tax revenues can no longer sustain the planned level of transfers to retirees. We quantify the threshold using a computable life-cycle model calibrated on the United States and fourteen European countries which have dependency ratios among the highest in the world. We examine the effects on the threshold and welfare of a number of policies often advocated to improve the sustainability of pension systems. New tax data on dynamic Laffer effects are provided.

Keywords: dependency ratio; fiscal space; Laffer effects; pensions; fiscal policy sustainability (search for similar items in EconPapers)
JEL-codes: E62 H20 H55 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-age, nep-dge, nep-mac and nep-pbe
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Related works:
Journal Article: Population aging, social security and fiscal limits (2020)
Working Paper: Population Aging, Social Security and Fiscal Limits (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_7121

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