A Tradeoff between the Output and Current Account Effects of Pension Reform

We compare the long-term output and current account effects of pension reforms that increase the retirement age with those of reforms that cut pension benefits, conditional on reforms achieving similar fiscal targets. We show the presence of a policy trade-off. Pension reforms that increase the reti...

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Bibliographische Detailangaben
Hauptverfasser:	Catalan, Mario, Magud, Nicolas E
Format:	Buch
Sprache:	eng
Schlagworte:	Balance of payments Econometric models Industrial productivity Pension reforms Production Current account Economic models Pension reform external balance dyamic general equilibrium model pension retirement retirement age pension benefits benefits pension reforms wage pension benefit pension reform tax rate payroll pension system labor force payroll tax pension spending tax rates lower pension pension expenditure benefit formula retirement period pension systems wage growth net wage individual pension labor income replacement rate wage rate wages retirement income pension income revenue collection domestic saving labor force participation pensions payroll taxes labor input labor incentives net return pay-as-you-go pension system Pensions
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Beschreibung
Zusammenfassung:	We compare the long-term output and current account effects of pension reforms that increase the retirement age with those of reforms that cut pension benefits, conditional on reforms achieving similar fiscal targets. We show the presence of a policy trade-off. Pension reforms that increase the retirement age have a large positive effect on output, but a small (and often negative) effect on the current account. In contrast, reforms that cut pension benefits improve the current account balance but reduce output. Mixed pension reforms, which extend the working life and cut pension benefits, can simultaneously boost output and the current account.