Increasing Longevity and Social Security Reforms

21 Pages Posted: 26 Sep 2006

See all articles by Torben M. Andersen

Torben M. Andersen

University of Aarhus - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Date Written: August 2006

Abstract

Increasing longevity causes an upward trend in the dependency ratio in many countries. This raises concerns about the financial sustainability of social security schemes, and reform initiatives and proposals abound. It is shown that a fundamental policy choice inevitably arises since a given social security system cannot be maintained by simply indexing retirement ages and benefits to longevity. The political reform process is analysed using the so-called legislative procedure. When longevity increases, the young generation contributes more, and the old generation faces lower benefits and a retirement age that increases more than proportionally to the increase in longevity.

Keywords: longevity, social security, political economy

JEL Classification: D72, H55, J11, J14, J18

Suggested Citation

Andersen, Torben M., Increasing Longevity and Social Security Reforms (August 2006). CESifo Working Paper Series No. 1789, Available at SSRN: https://ssrn.com/abstract=932493

Torben M. Andersen (Contact Author)

University of Aarhus - Department of Economics ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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Centre for Economic Policy Research (CEPR)

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IZA Institute of Labor Economics

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