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Aging and the financing of social security in Switzerland

Summary

The gains in life expectancy are expected to double the dependency ratio and increase population by 10% in Switzerland until 2050. To quantify the effects on social security and public finances, we use an overlapping generations model with five margins of labor supply: labor market participation, hours worked, job search, retirement, and on-the-job training. A passive fiscal strategy would be very costly. A comprehensive reform, including an increase in the retirement age to 68 years, may limit the tax increases to 4 percentage points of value added tax and reduce the decline of per capita income to less than 6%.

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Financial support by the Swiss State Secretariat for Economic Affairs (SECO) is gratefully acknowledged. We appreciate stimulating comments by SECO economists, seminar participants at the University of St. Gallen and Hannes Berger and Ludwig Strohner. We are particularly grateful for very constructive comments by an anonymous referee and by the editor, Klaus Neusser.

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Keuschnigg, C., Keuschnigg, M. & Jaag, C. Aging and the financing of social security in Switzerland. Swiss J Economics Statistics 147, 181–231 (2011). https://doi.org/10.1007/BF03399345

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  • DOI: https://doi.org/10.1007/BF03399345

JEL-Classification

  • D58
  • D91
  • H55
  • J26
  • J64

Keywords

  • aging
  • social security
  • retirement
  • human capital
  • unemployment