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The automatic adjustment of pension expenditures in Spain:an evaluation of the 2013 pension reform

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  • Alfonso R. Sánchez

    (Universidad Pablo de Olavide de Sevilla)

Abstract

This paper simulates the future performance of the Spanish pension system using a large OLG model. We compare the system in place after the 2011 pension reform to that emerging after the latest (2013) institutional changes. In particular, we explore the workings of the new indexing mechanism, linking pension payments to life expectancy and to the system’s aggregate flows of income and expenditure. We consider several alternative eco-demographic environments in our analysis and assess the welfare consequences for the different cohorts affected. Overall, the new automatic adjusting mechanism is broadly successful in its goal of stabilising the financial condition of the system. But the welfare costs imposed on some cohorts (e g. young workers at the beginning of the reform) is very heavy.

Suggested Citation

  • Alfonso R. Sánchez, 2014. "The automatic adjustment of pension expenditures in Spain:an evaluation of the 2013 pension reform," Working Papers 1420, Banco de España.
    • Handle: RePEc:bde:wpaper:1420
    as

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    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/14/Fich/dt1420e.pdf
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    References listed on IDEAS

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    Cited by:

    1. Grech, Aaron George, 2015. "Pension reforms in the 1990s and during the financial crisis: More of the same?," MPRA Paper 66894, University Library of Munich, Germany.

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    More about this item

    Keywords

    pension reform; automatic adjustment mechanism; population aging; Spain;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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