Population Aging, Social Security and Fiscal Limits

Arbeitspapier

We study the sustainability of pension systems using a life-cycle model with distortionary taxation that sets an upper limit to the real value of tax revenues. This limit implies an endogenous threshold dependency ratio, i.e. a point in the cross-section distribution of the population beyond which tax revenues can no longer sustain the planned level of transfers to retirees. We quantify the threshold using a computable life-cycle model calibrated on the United States and fourteen European countries which have dependency ratios among the highest in the world. We examine the effects on the threshold and welfare of a number of policies often advocated to improve the sustainability of pension systems. New tax data on dynamic Laffer effects are provided.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 7121

Classification and Topics

• Classification: Wirtschaft ; Fiscal Policy ; Taxation, Subsidies, and Revenue: General ; Social Security and Public Pensions
• Subject: dependency ratio ; fiscal space ; Laffer effects ; pensions ; fiscal policy sustainability

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Heer, Burkhard ; Polito, Vito ; Wickens, Michael
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/181321
• Last update: 10.03.2025, 11:45 AM CET