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The Future of Spanish Pensions

Javier Diaz Gimenez () and Julian Diaz Saavedra ()
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Javier Diaz Gimenez: IESE Business School
Julian Diaz Saavedra: Department of Economic Theory and Economic History, University of Granada.

Authors registered in the RePEc Author Service: Javier Díaz-Giménez () and Julián Díaz-Saavedra ()

No 14/03, ThE Papers from Department of Economic Theory and Economic History of the University of Granada.

Abstract: We use an overlapping generations model economy with endogenous retirement to study the 2011 and 2013 reforms of the Spanish public pension system. We nd that this latest reforms, which extend the number of years os contributions used to compute the pensions, delay the retirement ages, introduce two sustainability factors, and e ectively transform the Spanish pay-as-yougo system into a de ned-contribution system, succeed in making Spanish pensions sustainable until 2037, but they fail to do so afterwards. The success until 2037 is achieved reducing the real value of the average pension and leaving the many loopholes of the contributivity and the transparency of the system unchanged. This reduction in pensions is progressive and, by 2037, the average pension will be approximately 20 percent smaller in real terms than what it would have been under the pension rules prevailing in 2010. The 2013 pension reform fails after 2037 because, from that year onwards, approximately 50 percent of the Spanish retirees will be paid the minimum pension, which is exempt from the sustainability factors. We conjecture that further reforms lurk in the future of Spanish pensions.

Keywords: Computable general equilibrium; social security reform; retirement. (search for similar items in EconPapers)
JEL-codes: C68 H55 J26 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2014-05-27
New Economics Papers: this item is included in nep-age, nep-cmp, nep-dge and nep-eur
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Journal Article: The future of Spanish pensions* (2017) Downloads
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