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Modeling a Pension System Reform: A Replication Study Comparing the Effects of a Fully Funded Reform in Germany and France

Neubauer, Linda Jasmin LU and Tchibalina, Elizaveta (2022) NEKN01 20221
Department of Economics
Abstract
In this paper, we replicate a study by de la Croix et al. (2013) to analyze the effects of population aging in Germany when implementing two different counterfactual pension systems. De la Croix et al. (2013) use a dynamic overlapping generations model to simulate population aging and its effects on the French economy. Calibrating and analyzing the same model as in de la Croix et al. (2013) with new data for Germany allows us to compare results over two countries and draw conclusions on the fiscal sustainability of current pension systems in the face of demographic change. The results suggest similar patterns for households’, firms’, and governments’ behavior in Germany and France. According to theory, population aging leads to a decrease... (More)
In this paper, we replicate a study by de la Croix et al. (2013) to analyze the effects of population aging in Germany when implementing two different counterfactual pension systems. De la Croix et al. (2013) use a dynamic overlapping generations model to simulate population aging and its effects on the French economy. Calibrating and analyzing the same model as in de la Croix et al. (2013) with new data for Germany allows us to compare results over two countries and draw conclusions on the fiscal sustainability of current pension systems in the face of demographic change. The results suggest similar patterns for households’, firms’, and governments’ behavior in Germany and France. According to theory, population aging leads to a decrease in labor supply and a relative capital surplus, resulting in a shift in factor prices. The results show that activity rates for elderly workers increase while savings per capita decrease. Total savings decrease in Germany while they are increasing in France, in line with a decline in population in Germany. New migration data for Germany does neither counteract the increase in Germany’s old-age dependency ratio nor the overall decrease of the German population. Shifting from a pay-as-you-go (PAYG) to a fully funded pension system causes a drop in public pension costs, positively affecting the fiscal sustainability of the system. (Less)
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author
Neubauer, Linda Jasmin LU and Tchibalina, Elizaveta
supervisor
organization
course
NEKN01 20221
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Pension System, PAYG, Fully Funded, Population Aging
language
English
id
9083821
date added to LUP
2022-10-10 09:23:55
date last changed
2022-10-10 09:23:55
@misc{9083821,
  abstract     = {{In this paper, we replicate a study by de la Croix et al. (2013) to analyze the effects of population aging in Germany when implementing two different counterfactual pension systems. De la Croix et al. (2013) use a dynamic overlapping generations model to simulate population aging and its effects on the French economy. Calibrating and analyzing the same model as in de la Croix et al. (2013) with new data for Germany allows us to compare results over two countries and draw conclusions on the fiscal sustainability of current pension systems in the face of demographic change. The results suggest similar patterns for households’, firms’, and governments’ behavior in Germany and France. According to theory, population aging leads to a decrease in labor supply and a relative capital surplus, resulting in a shift in factor prices. The results show that activity rates for elderly workers increase while savings per capita decrease. Total savings decrease in Germany while they are increasing in France, in line with a decline in population in Germany. New migration data for Germany does neither counteract the increase in Germany’s old-age dependency ratio nor the overall decrease of the German population. Shifting from a pay-as-you-go (PAYG) to a fully funded pension system causes a drop in public pension costs, positively affecting the fiscal sustainability of the system.}},
  author       = {{Neubauer, Linda Jasmin and Tchibalina, Elizaveta}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Modeling a Pension System Reform: A Replication Study Comparing the Effects of a Fully Funded Reform in Germany and France}},
  year         = {{2022}},
}