Skip to main content

Rational Pension Policies

Summary

Aim of this keynote is to develop a framework how to approach the design of pension policies as rationally as possible. The first step is to realize and accommodate endogenous adjustments. The second step is to align the root causes of demographic change with corresponding reform steps which include but are not confined by pension reform. The third step is to separate the issues as best as possible to strengthen the political feasibility of reform.

The paper shows that relatively few and moderate reform steps suffice to solve the demographic problem in countries such as Germany and Switzerland. This is in striking contrast to the widespread resistance to reform. We falsify some of the myths, prejudices and misperceptions which make reforms politically so hard to put into place.

References

  • Adam, S., E. Bonsang, S. Germain, and S. Perelman (2007), “Retirement and Cognitive Reserve: A Stochastic Frontier Approach Applied to Survey Data”, CREPP working papers, 2007(04), HEC-ULg.

    Google Scholar 

  • Attanasio, O.P., S. Kitao, and G.L. Violante (2007), “Global Demographic Trends and Social Security Reform”, Journal of Monetary Economics, 57(1), pp. 144–198.

    Article  Google Scholar 

  • Auerbach, A.J., and L.J. Kotlikoff (1987), Dynamic Fiscal Policy, Cambridge, MA: Cambridge University Press.

    Google Scholar 

  • Avendano, M., A.R. Aro, and J. Mackenbach (2005), “Socio-Economic Disparities in Physical Health in 10 European Countries”, in Health, Ageing and Retirement in Europe — First Results from the Survey of Health, Ageing, and Retirement in Europe, A. Börsch-Supan, A. Brugiavini, H. Jürges, J. Mackenbach, J. Siegrist, and G. Weber (eds.), MEA, Mannheim.

    Google Scholar 

  • Behncke, S. (2012), “Does Retirement Trigger Ill Health?”, Health Economics, 21(3), pp. 282–300.

    Article  Google Scholar 

  • Boeri, T., A. Börsch-Supan, and G. Tabellini (2002), “Would You Like to Reform the Pension System? The Opinions of European Citizens”, American Economic Review 92, pp. 396–401.

    Article  Google Scholar 

  • Börsch-Supan, A., and M. Schuth (2014), “Early Retirement, Mental Health, and Social Neworks, in Discoveries in the Economics of Aging, D.A. Wise (ed.), pp. 225–254, Chicago: The University of Chicago Press.

    Chapter  Google Scholar 

  • Börsch-Supan, A., and P. Tinios, (2001), “The Greek Pension System: Strategic Framework for Reform”, in Greece’s Economic Performance and Prospects, R.C. Bryant, N.C. Garganas, and G.S. Tavlas (eds.), pp. 361–451, Athens: Bank of Greece and The Brooking Institution.

    Google Scholar 

  • Börsch-Supan, A. (2000), “Incentive Effects of Social Security on Labor Force Participation: Evidence in Germany and Across Europe”, Journal of Public Economics, 78, pp. 25–49.

    Article  Google Scholar 

  • Börsch-Supan, A. (2005), “From Traditional DB to Notional DC Systems: The Pension Reform Process in Sweden, Italy, and Germany”, Journal of the European Economic Association, Vol. 3(2–3), April–May 2005, pp. 458–465.

    Article  Google Scholar 

  • Börsch-Supan, A. (2013), “Myths, Scientific Evidence and Economic Policy in an Aging World”, Journal of the Economics of Ageing, 1–2, pp. 3–15.

    Article  Google Scholar 

  • Börsch-Supan, A., and C.B. Wilke (2003), “The German Social Security System: How It Was and How It Will Be”, NBER Working Paper No. 10525, Cambridge, Mass.

    Google Scholar 

  • Börsch-Supan, A., and M. Weiss (2013), “Productivity and Age: Evidence from Work Teams at the Assembly Line”, ROA Research Memorandum, 2013(9), Maastricht University.

    Google Scholar 

  • Börsch-Supan, A., A. Ludwig, and J. Winter (2006), “Aging, Pension Reform, and Capital Flows: A Multi-Country Simulation Model”, Economica, 73, pp. 625–658.

    Article  Google Scholar 

  • Börsch-Supan, A., K. Hârtl, and A. Ludwig (2014), “Aging in Europe: Reforms, International Diversification, and Behavioral Reactions”, American Economic Review P&P, 104(5), pp. 224–229.

    Article  Google Scholar 

  • Coe, N.B., H.M. von Gaudecker, M. Lindeboom, and J. Maurer (2012), “The Effect of Retirement on Cognitive Functioning”, Health Economics 21(8), pp. 913–927.

    Article  Google Scholar 

  • Eurostat (2013), http://ec.europa.eu/eurostat/ (online data code: hlth_hlye).

  • Fehr, H., S. Jokisch, and L. Kotlikoff (2003), “The Developed World’s Demographic Transition: The Roles of Capital Flows, Immigration, and Policy”, Working Paper No. 10096, National Bureau of Economic Research (NBER).

    Book  Google Scholar 

  • Franco, D., and N. Sartor (2003), “Notional Defined Contribution in Italy: Unsatisfactory Present, Uncertain Future”, Mimeo, Bank of Italy.

    Google Scholar 

  • Freedman, V.A., E.M. Crimmins, R.F. Schoeni, B. Spillman, H. Aykan, E. Kramarow et al. (2004), “Resolving Inconsistencies in Old-Age Disability Trends: Report from a Technical Working Group”, Demography, 41(3), pp. 417–441.

    Article  Google Scholar 

  • Freedman, V., B. Spillman, P. Andreski, J.C. Cornman, E. Crimmins, E. Kramarow et al. (2013), “Trends in Late-Life Activity Limitations: An Update from 5 National Surveys”, Demography, 50(2), pp. 661–671.

    Article  Google Scholar 

  • Galasso, V. (2007), The Political Future of Social Security in Aging Societies, Cambridge, MA: MIT Press.

    Google Scholar 

  • Gasche, M., T. Bucher-Koenen, M. Haupt, and S. Angstmann (2013), „Die Kosten der Riester-Rente im Vergleich“, MEA-Discussion Paper 04-2013, München.

    Google Scholar 

  • Göbel, C., and T. Zwick (2009), „Age and Productivity — Evidence from Linked Employer Employee Data”, ZEW Discussion Paper, 9(20), Zentrum für Europâische Wirtschaftsforschung.

    Google Scholar 

  • Gruber, J., and D.A. Wise (eds.) (2004), Social Security Programs and Retirement around the World: Micro Estimation, Chicago: The University of Chicago Pr

  • Gruber, J., and D.A. Wise (eds.) (2010), Social Security Programs and Retirement around the World: Youth Employment, Chicago: The University of Chicago Pr

  • Holzmann, R., and E. Palmer (2005), Pension Reform — Issues and Prospects for Non-Financial Defined Contribution (NDC) Schemes, Washington D.C.: World Bank.

    Google Scholar 

  • Holzmann, R., and R. Hinz (2005), Old-Age Income Support in the 21st Century: The World Bank’s Perspective on Pension Systems and Reform, Washington, D.C.: The World Bank.

    Book  Google Scholar 

  • Kommission für die Nachhaltigkeit in der Finanzierung der Sozialen Sicherungssysteme (2003), Abschlussbericht. Bundesministerium für Gesundheit und Soziale Sicherheit, Berlin, http://www.bmgs.bund.de/deu/gra/themen/sicherheit/kommission/index.cfm.

  • Kydland, F., and E. Prescott (1977), “Rules Rather than Discretion: The Inconsistency of Optimal Plans”, Journal of Political Economy, 85, pp. 473–490.

    Article  Google Scholar 

  • Malmberg, B., T. Lindh, and M. Halvarsson (2008), “Productivity Consequences at the Plant Level of Work-Force Ageing: Stagnation or a Horndal Effect?” Population and Development Review, 34, pp. 238–256.

    Google Scholar 

  • Mazzonna, F., and F. Peracchi (2012), “Aging, Cognitive Abilities and Retirement”, European Economic Review, 56(4), pp. 691–710.

    Article  Google Scholar 

  • Myrskylâ, M, H.P. Kohler, and F. Billari (2009), “Advances in Development Reverse Fertility Declines”, Nature, 460 (7256), pp. 741–743.

    Article  Google Scholar 

  • OECD (2013), Pensions at a Glance, OECD, Paris.

    Book  Google Scholar 

  • Oeppen, J., and J. Vaupel (2002), “Enhanced: Broken Limits to Life Expectancy”, Science 296 (5570), pp. 1029–1031.

    Article  Google Scholar 

  • Palacios, R., and M. Pallarès-Miralles (2000), “International Patterns of Pension Provision”, Social Protection Discussion Paper Series No. 0009, Washington, D.C.: The World Bank.

    Google Scholar 

  • Palmer, E. (2000), “The Swedish Pension Reform Model: Framework and Issues”, Social Protection Discussion Paper No. 12, Washington, D.C.: The World Bank.

    Google Scholar 

  • Rohwedder, S., and R.J. Willis (2010), “Mental retirement”, Journal of Economic Perspectives, 24(1), pp. 119–138.

    Article  Google Scholar 

  • Rowe, J.W., L.F. Berkman, R. Binstock, A. Börsch-Supan, J. Cacioppo, L. Carstensen et al. (2009), “Facts and Fictions about an Aging America”, Contexts, 8(4), pp. 16–21.

    Article  Google Scholar 

  • Safire, W. (2007), “On Language: Third Rail”, The New York Times, http://www.nytimes.com/2007/02/18/magazine/18wwlnsafire.t.html, retrieved 8 September 2015.

    Google Scholar 

  • Valdés-Prieto, S. (2000), “The Financial Stability of Notional Account Pensions,” Scandinavian Journal of Economics.

    Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Additional information

Keynote speech at the Annual Congress 2015 of the Swiss Society for Economics and Statistics on “The Solvency of Pension Systems” Basel, 3 June 2015.

Rights and permissions

Open Access  This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made.

The images or other third party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder.

To view a copy of this licence, visit https://creativecommons.org/licenses/by/4.0/.

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Börsch-Supan, A. Rational Pension Policies. Swiss J Economics Statistics 152, 103–124 (2016). https://doi.org/10.1007/BF03399424

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/BF03399424