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Coping with Spain’s Aging :, Retirement Rules and Incentives, Willy Hoffmaister, Mario Catalan, Jaime Guajardo

This paper evaluates the macroeconomic and welfare effects of extending the averaging period used to calculate pension benefits in a pay-as-you-go system. It also examines the complementarities between reforms extending the averaging period and those increasing the retirement age under alternative tax policies. The analysis is based on a model in the Auerbach-Kotlikoff tradition applied to the Spanish economy. Without reforms, the simulations suggest that aging-related spending as a share of output will increase 16 percentage points by 2050, which are twice as much as in European Commission (2006) projections due to general equilibrium effects. Also, reforms extending the averaging period to the entire work life limit expenditure pressures at the peak of the demographic shock as much as increasing the retirement age in line with life expectancy (4 percentage points of GDP). These reforms and prefunding the demographic shock mitigate the adverse macroeconomic effects of aging and improve welfare
Table Of Contents
Contents; I. Introduction; II. The Model; A. Model Overview; B. Household; C. Firms; D. The Government; E. Equilibrium; F. Balanced Growth Equilibrium and Calibration; G. Household's Labor, Consumption, and Asset Holdings in the Initial Steady State; III. Baseline Simulations; A. Demographic Transition; B. Baseline Macroeconomic Scenario; IV. Simulations of Pension Reforms; A. Effects of Pension Reform in the Final Steady State; B. Effects of Pension Reforms in the Demographic Transition; C. Effects of Tax-Smoothing Policies; D. Welfare Analysis; V. Conclusion; Appendixes
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (53 p.)
Specific Material Designation
Form Of Item

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