Demographic change, pension reform and redistribution in Spain

Alfonso R Sánchez-Martín () and Virginia Sanchez-Marcos
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Alfonso R Sánchez-Martín: Department of Economics, Universidad Pablo de Olavide
Authors registered in the RePEc Author Service: Alfonso Ramon Sanchez Martin ()

No 08.04, Working Papers from Universidad Pablo de Olavide, Department of Economics

Abstract: Recent demographic changes have spurred pension reforms aimed at restoring the financial sustainability of PAYG systems. In Spain, the most significant reforms were undertaken in 1997 and in 2002, entailing an increase in the length of the averaging period in the pension formula, an increase in the penalties for early retirement and for retirement with short contributive records, a bonus for retirement after the age of 65, and a change in the eligibility conditions. In this paper we use an Applied General Equilibrium model populated by two-earners households to evaluate the redistributive impact of the pension system and the financial and welfare consequences of these reforms on households that differ in their education, region of residence and year of birth. The initial redistribution is assessed by comparing the internal rate of return provided to different households. We find that they vary considerable depending on education and cohort. Regarding the reforms, we find an increase in the implicit debt of the pension system after the reforms, and important changes in welfare. Households up to secondary education born between 1935 and 1975 are predicted to benefit from the reform, while the welfare of younger cohorts will be hit by higher taxes and unfavorable macroeconomic changes.

Keywords: Social Security; Pension Reform; Applied General Equilibrium; Redistribution (search for similar items in EconPapers)
JEL-codes: D58 H55 J11 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2008-03
New Economics Papers: this item is included in nep-age
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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http://www.upo.es/serv/bib/wps/econ0804.pdf First version, 2008 (application/pdf)

Related works:
Working Paper: Demographic Change, Pension Reform and Redistribution in Spain (2008)
Working Paper: Demographic Change, Pension Reform and Redistribution in Spain (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:pab:wpaper:08.04

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