Aging, (Pension) Reforms and the Shadow Economy in Southern Europe

Daniel Baksa () and Zsuzsa Munkacsi ()
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Daniel Baksa: Central European University

No 32, Bank of Lithuania Working Paper Series from Bank of Lithuania

Abstract: Southern Europe is currently experiencing a double-whammy: high levels of government debt coupled with a rapidly aging population. Thus, the consolidation of (pension) budgets seems inevitable. In this paper we examine the short- and long-run macroeconomic e ects of public old-age pension reforms and other scal policies under conditions of population aging. To do so, we calibrate OGRE, a New Keynesian model with overlapping generations, unemployment and an underground sector to match annual data on Portugal and Spain. Our main nding is that a retirement-age increase is the least harmful policy with respect to long-run output. However, we raise some doubts about the feasibility of implementing this policy.Classification-JEL: E24, E26, H55, J11, J46Keywords: population aging, public old-age pension reforms, pay-as-you-go, fully funded, shadow economy, informal employment, government debt, New Keynesian model, overlapping generations, demography, unemployment, retirement ageLength: 71 pages

Pages: 46 pages
Date: 2016-08-23
New Economics Papers: this item is included in nep-age, nep-dge, nep-eec, nep-iue, nep-mac and nep-sog
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Citations: View citations in EconPapers (3)

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