Pension Systems (Un)sustainability and Fiscal Constraints: A Comparative Analysis

Burkhard Heer, Vito Polito and Michael R. Wickens

No 18181, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Using an overlapping generations model, two new indicators of public pension system sustainability are proposed: the pension space, which measures the capacity to pay for pension expenditures out of labour taxation, and the pension space exhaustion probability reflecting demographic uncertainties. These measures reveal that the pension spaces of advanced economies are strikingly different. Most nations have little scope to further finance pensions out of labour income taxation over the next thirty years. There is no one-size-fits-all solution. Risk-equivalent pension reforms enhance welfare in the long run, particularly for rapidly ageing nations, but also entail non-negligible transitional costs.

Keywords: Ageing; Fiscal space; Public pension sustainability; Overlapping-generations model (search for similar items in EconPapers)
JEL-codes: E62 H20 H55 (search for similar items in EconPapers)
Date: 2023-05
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Working Paper: Pension Systems (Un)sustainability and Fiscal Constraints: A Comparative Analysis (2023)
Working Paper: Pension Systems (Un)sustainability and Fiscal Constraints: A Comparative Analysis (2023)
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