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Sustainability of the French first pillar pension scheme (CNAV): assessing automatic balance

Author

Listed:
  • Frédéric Gannon

    (CERENE - Centre d'Etude et de Recherche en économiE et gestioN LogistiquE - ULH - Université Le Havre Normandie - NU - Normandie Université, EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Stéphane Hamayon
  • Florence Legros

    (SDF - Laboratoire Structure et Dynamiques Financières - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres)

  • Vincent Touzé

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

Abstract

In this paper, we apply two types of automatic balance mechanism (ABM) to the French first pillar pension system for private sector employees (CNAV). One is based on a tax gap ratio (TGR-ABM) and the other is the smooth ABM (S-ABM) developed by Gannon, Legros and Touzé (2013). Two long-run forecast scenarios over the period 2014-2063 are analysed. The first is optimistic ("benchmark") and assumes a 4.5% unemployment rate and a 1.5% productivity growth rate in the long run. The second is more pessimistic ("prudent"), with a 7.5% unemployment rate and a 1% productivity growth rate in the long run. For the benchmark (respectively prudent) scenario, a TGR-ABM requires, now and for the next 50 years, a 2.8% (respectively 6.3%) decrease in pensions and a 2.9% (respectively 6.7%) increase in the tax rate. An S-ABM requires, for the benchmark (respectively prudent) scenario, an immediate 1.5% (respectively 3.6%) decrease in pensions and a 1.4% (respectively 3.5%) increase in the tax rate. In the long run (50 years), an S-ABM requires a 4.5% (respectively 9.1%) reduction in pensions and a 4.5% (respectively 9.1%) increase in the tax rate.

Suggested Citation

  • Frédéric Gannon & Stéphane Hamayon & Florence Legros & Vincent Touzé, 2014. "Sustainability of the French first pillar pension scheme (CNAV): assessing automatic balance," SciencePo Working papers Main hal-03460192, HAL.
    • Handle: RePEc:hal:spmain:hal-03460192
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03460192
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    References listed on IDEAS

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    1. A. W. Phillips, 1958. "The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957," Economica, London School of Economics and Political Science, vol. 25(100), pages 283-299, November.
    2. Stéphane Hamayon & Florence Legros, 2001. "Construction and Impact of a Buffer Fund within the French PAYG Pension Scheme in a Demo-Economic Model," CESifo Working Paper Series 531, CESifo.
    3. Didier Blanchet & Florence Legros, 2002. "France: The Difficult Path to Consensual Reforms," NBER Chapters, in: Social Security Pension Reform in Europe, pages 109-136, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Frédéric Gannon & Florence Legros & Vincent Touzé, 2020. "Sustainability of pension schemes. Building a smooth automatic balance mechanism with an application to the us social security," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(6), pages 377-401.
    2. repec:spo:wpmain:info:hdl:2441/1nnmnobpu685qait9jaqir07rn is not listed on IDEAS
    3. repec:hal:spmain:info:hdl:2441/1nnmnobpu685qait9jaqir07rn is not listed on IDEAS
    4. Frédéric Gannon & Florence Legros & Vincent Touzé, 2020. "Sustainability of pension schemes. Building a smooth automatic balance mechanism with an application to the us social security," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(6), pages 377-401.

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    Keywords

    Pension scheme sustainability; Automatic balance mechanism;

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