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A Framework for Assessing the Costs of Pension Reform Reversals
Author: Daniel Baksa, Zsuzsa Munkacsi, and Carolin Nerlich
Series:
IMF Working Papers
Volume/Issue:
Volume 2020: Issue 132
Language:
English
Publication Date:
17 Jul 2020
DOI:
https://doi.org/10.5089/9781513550497.001
ISBN:
9781513550497
ISSN:
1018-5941
Pages:
70
Keywords:
WP; benefit ratio; public debt-to-GDP ratio; old-age dependency ratio; contribution rate; labour force; public pension; reform reversals; population ageing; overlapping generations model; Ageing Report; adverse impact; Aging; Pension reform; Pension spending; Retirement; Europe
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Several European countries are currently considering reversing parts of their pension reforms that were adopted previously to improve sustainability. In this paper we present a framework that allows us to quantify the macroeconomic and fiscal costs of such reversals. We thereby integrate the country-specific information from the latest Ageing Report into a dynamic general equilibrium model with overlapping generations. Focusing on Germany and Slovakia as country cases, our model replicates the Ageing Report’s pension expenditure projections very well. We calculate the macroeconomic impact of first the additional pension reforms needed to contain the public debt pressures arising from population ageing and second the costs of reform reversals. Our model results show that undoing past pension reforms would generate substantial adverse macroeconomic costs and could pose challenges for fiscal sustainability.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund