IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/32796.html
   My bibliography  Save this paper

Pension Reforms and Inequality in Germany: Micro-Modelling

Author

Listed:
  • Axel H. Börsch-Supan
  • Johannes Rausch
  • Luca Salerno

Abstract

Germany, like many other countries, has undergone a series of pension reforms since the 1980s which generally decreased benefit generosity and increased the retirement age due to demographic pressures. This paper investigates whether these reforms have increased income and wealth inequality among retirees. In order to answer this question, we employed counterfactual simulations in which we predict how the income and social security wealth distributions would have developed if these reforms had not taken place, compared to the actual development of the income and social security wealth distributions. Our analysis reveals that the pension reforms has led to an increase in inequality in terms of social security wealth between the 1990s and 2000s and decreased inequality thereafter. The decrease in inequality is mainly driven by social assistance as it represents a lower bound for benefit size and thus mitigates the effect of benefit-reducing reforms for lower income groups. We further divided the total effect of the pension reforms into two components. The first component is the mechanical effect, which keeps retirement probabilities constant and only considers changes in benefit calculation. The second component is the behavioral effect, which describes how SSW differs because of altered retirement probabilities. Our findings indicate that in the German context the behavioral effect is statistically significant but economically small.

Suggested Citation

  • Axel H. Börsch-Supan & Johannes Rausch & Luca Salerno, 2024. "Pension Reforms and Inequality in Germany: Micro-Modelling," NBER Working Papers 32796, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:32796
    Note: AG
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w32796.pdf
    Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:32796. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.