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Social Science > Demography

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Cover Departmental Papers
Long-Term Spending Pressures in Europe
Stephanie Eble
,
Alexander Pitt
,
Irina Bunda
,
Oyun Erdene Adilbish
,
Nina Budina
,
Gee Hee Hong
,
Moheb T Malak
,
Sabiha Mohona
,
Alla Myrvoda
, and
Keyra Primus
European countries face high, rising, and long-lasting spending pressures, calling for a renewed focus on fiscal policy and comprehensive structural reforms to prepare their economies for the future. On top of existing fiscal consolidation needs, spending pressures in five key areas are imminent and growing in Europe: pensions and healthcare/long-term care driven by population aging; climate transition; increased defense spending; and higher borrowing costs. Some pressures are immediate, others will build up over time. Projections indicate that additional expenditures could reach 5¾ percent of GDP annually by 2050 in Advanced Europe and 8 percent in Central, Eastern, and Southeastern Europe (CESEE). Addressing these challenges will require extensive efforts, including enhancing institutional capacity and implementing deep structural reforms to manage spending, ensure adequate revenue, and meet environmental, social, and security objectives. Policymakers must also consider the distributional impacts of reforms, particularly on vulnerable households. A broad reform agenda tailored to country circumstances is essential, with urgent actions needed in many countries to ensure the sustainability of pension systems and to combat climate change through fiscal instruments like carbon pricing. Increased revenue mobilization, particularly in CESEE, and the reduction of inefficient spending are critical for creating fiscal space for priority expenditures. Strengthening the EU's fiscal capacity to provide common public goods such as climate, defense, energy security, and R&D and implementing structural reforms to enhance growth potential are also vital. However, raising awareness of these issues and implementing the necessary reforms will be challenging. A well-designed fiscal framework that incorporates long-term spending pressures, supported by comprehensive analysis and data, is crucial for informing public debate and guiding national decision-making to ensure that spending pressures are adequately addressed. Ultimately, inaction is not an option, as it risks fiscal sustainability and the fulfillment of priority spending needs.
Keywords:
Fiscal policy; structural reforms; climate; defense; demographics; aging; health; public debt; fiscal institutions; spending pressure; member states; EU climate goal; increase EU resilience; emissions trading system; EU financing; EU rule; carbon border adjustment mechanism; EU budget; EU country; climate goal; spending needs; Pension spending; Defense spending; Pensions; Europe; priority spending needs; data from European Union; inefficient spending; long-term spending pressure
Cover IMF Working Papers
Social Security Reforms, Retirement and Sectoral Decisions
Bruno R. Delalibera
,
Pedro Cavalcanti Ferreira
, and
Rafael Machado Parente
In many countries, the regulations governing pension systems, hiring procedures, and job contracts differ between the public and private sectors. Public sector employees tend to have longer tenures and higher wages compared to workers in the private sector. As such, social security reforms can affect both retirement decisions and sectoral choices. We study the effects of social security reforms on retirement and sectoral behavior in an economy with multiple pension systems. We develop a general equilibrium life-cycle model with heterogeneous agents, three sectors - private formal, private informal and public - and endogenous retirement. We quantitatively assess the long-run effects of reforms being discussed and implemented around the world. Among them, we study the unification of pension systems and increasing the minimum retirement age. We calibrate our model to Brazil, where several of the retirement conditions resemble those of other countries. We find that these reforms lower the likelihood of individuals to apply to a public job and increase the profile of savings over the life cycle. In the long run, these reforms lead to higher output and capital, reduced informality, and average welfare gains. They also drastically reduce the social security deficit.
Keywords:
Social security reform; Public employment; Public deficit; Informality; reform experiment; retirement condition; social security deficit; retirement decision; Retirement; Aging; Public sector; East Asia; Global
Cover IMF Working Papers
Dissecting the Decline in Average Hours Worked in Europe
Diva Astinova
,
Romain A Duval
,
Niels-Jakob H Hansen
,
Ben Park
,
Ippei Shibata
, and
Frederik G Toscani
Three years after the COVID-19 crisis, employment and total hours worked in Europe fully recovered, but average hours per worker did not. We analyze the decline in average hours worked across European countries and find that (i) it is not cyclical but predominantly structural, extending a long-term trend that predates COVID-19, (ii) it mainly reflects reduced hours within worker groups, not a compositional shift towards lower-hours jobs and workers, (iii) men—particularly those with young children—and youth drive this drop, (iv) declines in actual hours match declines in desired hours. Policy reforms could help involuntary parttimers and women with young children raise their actual hours towards desired levels, but the aggregate impact on average hours would be limited to 0.5 to 1.5 percent. Overall, there is scant evidence of slack at the intensive margin in European labor markets, and the trend fall in average hours worked seems unlikely to reverse.
Keywords:
hours worked; working hours; labor market; Europe; policy reform; worker level; scant evidence; summary statistics; full time worker; Labor markets; Women; Labor supply; Labor force participation
Cover IMF Working Papers
Flattening the Curve and the Flight of the Rich: Pandemic-Induced Shifts in US and European Housing Markets
Nina Biljanovska
and
Giovanni Dell'Ariccia
The pattern of increasing suburban house prices relative to urban centers initiated during the pandemic continues to hold across the top 30 US metropolitan statistical areas (MSAs). In contrast, European countries such as Denmark, France, and the United Kingdom did not experience a similar shift in valuations. We posit and find supporting evidence that these divergent patterns partially due to differences in the characteristics of suburban areas, particularly in terms of household income and property sizes; with European suburbs being relatively poorer and characterized by smaller housing units. We show that, in the US, MSAs with suburban features more akin to those in European cities generally experienced little to no increase in suburban housing prices compared to their urban centers. Finally, our findings indicate that migration patterns of the high-income population might have partially influenced the urban-suburban revaluation in the US.
Keywords:
Property prices; House price gradient; City structure; High-income population mobility; population mobility; price gradient; housing unit; income gap; Housing prices; Income; Real estate prices; Inflation; Europe
Cover Selected Issues Papers
The Fiscal Cost of Aging in Belgium: Pensions and Healthcare
Mr. Jean-Jacques Hallaert
Belgium faces a fiscal consolidation challenge at a time when the fiscal cost of aging—primarily related to pension and health outlays—is mounting. Pension spending will increase relatively fast unless a combination of measures related to pension generosity and retirement eligibility are put in place. Potential efficiency gains are large in the health sector and could absorb part of the fiscal and reorganization costs related to an aging population.
Keywords:
Belgium; Aging; Fiscal cost of aging; Pensions; Healthcare; reorganization cost; cost of aging; cost pressure; fiscal cost; healthcare cost; Pension spending; Europe; Global
Cover IMF Staff Country Reports
Belgium: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper explores different aspects of fiscal consolidation in Belgium. Belgium is facing higher structural deficits and rising debt after the pandemic and energy crisis. Fiscal consolidation is needed to lower inflation, rebuild buffers, reduce debt, and preserve Belgium’s social contract. Comparisons with peers show that rationalizing and increasing the efficiency of social benefits and the public wage bill would need to be at the core of the consolidation effort. All federal entities should share the burden of the adjustment, in a coordinated manner, with accountability at all levels of government, and within a credible and clear multi-year consolidation plan. Comprehensive spending reviews would help target budgetary saving. In order to mitigate the growth impact in the near term and boost potential growth, public investment should be preserved, and the adjustment should go together with structural reforms to increase labor force participation and productivity.
Keywords:
state government expenditure; health efficiency frontier; cost of aging; major spending category; healthcare expenditure; Aging; Pension spending; Pensions; Fiscal consolidation; Europe; Global
Cover Selected Issues Papers
The Recent Decline in United Kingdom Labor Force Participation: Causes and Potential Remedies
Gloria Li
and
Mr. Carlos Mulas-Granados
This paper studies the puzzling decline in labor force participation observed in the UK following the pandemic. Retirement and long-term sickness appear to be the main drivers, with chronic illness remaining a lingering distinctive factor vis-a-vis peer countries. While the government has recently adopted a battery of measures to increase labor force participation, more could be done to improve health outcomes and increase the participation of the long-term sick and the disabled, keep older workers in the labor force, increase female labor force participation, and improve the skills and productivity of both domestic and foreign workers that join the workforce.
Keywords:
United Kingdom; labor force participation; inactivity; long-term illness; retirement; productivity; IMF Slected issues paper; health outcome; decline in United Kingdom; title page; UK system; inactivity spike; Labor markets; Aging; Labor force
Cover Selected Issues Papers
Spending Efficiency and Reforms: France
Iulia Ruxandra Teodoru
and
Ruud Vermeulen
To rebuild fiscal buffers after large fiscal responses to successive shocks over 2020-22, France will need to reverse the trend spending increase observed over the last three decades through structural spending reforms. This paper identifies areas where scope for savings or efficiency gains exist based on an evaluation of the level and efficiency of public spending in France relative to European peers, using benchmarking analysis and stochastic frontier analysis to derive efficiency frontiers. Reforming social protection, health, education, and civil service, and rationalizing tax expenditures should preserve or improve outcomes while generating savings that would help meet medium-term adjustment needs.
Keywords:
Public Expenditure; Efficiency; Fiscal Consolidation; Fiscal Policy; France; efficiency frontier; efficiency gain; frontier analysis; IMF staff calculation; spending gap; Tax expenditures; Aging; Europe; Global
Cover IMF Research Perspectives
IMF Research Perspectives: Spring/Summer 2021
International Monetary Fund. Research Dept.
IMF Research Perspectives: Spring/Summer 2021
Keywords:
IMF research perspective; government spending multiplier; R&D effort; IMF CSF; central bank financing; COVID-19; Bank credit; Fiscal stance; Global; Sub-Saharan Africa; Europe; Africa
Cover IMF Working Papers
A Unified Model of Cohort Mortality for Economic Analysis
We propose a dynamic production function of population health and mortality from birth onwards. Our parsimonious model provides an excellent fit for the mortality and survival curves for both primate and human populations since 1816. The model sheds light on the dynamics behind many phenomena documented in the literature, including (i) the existence and evolution of mortality gradients across socio-economic statuses, (ii) non-monotonic dynamic effects of in-utero shocks, (iii) persistent or “scarring” effects of wars and (iv) mortality displacement after large temporary shocks such as extreme weather.
Keywords:
Mortality; In-utero shocks; Selection; Scarring; WP; health stock; health distribution; investment schedule; log mortality rates; health shock