nep-pub New Economics Papers
on Public Finance
Issue of 2005‒06‒27
two papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Political economy and pensions in ageing societies – a note on how an ”impossible” reform was implemented in Sweden. By Kruse, Agneta
  2. Population Aging and Legal Retirement Age. By Juan Antonio Lacomba; Francisco Miguel Lagos

  1. By: Kruse, Agneta (Department of Economics, Lund University)
    Abstract: Ageing puts a strain on most countries’ pension systems; forecasts show them to be more or less unsustainable. Evidence from social choice research, theoretical as well as empirical, does not seem to offer a way out of the dilemma, as the median voter will resist a reform. Despite this, Sweden has implemented a major reform, supposedly making the system sustainable. The question in this paper is thus: how was it possible to launch such a reform in Sweden? The analysis is based on majority voting models. Important explanatory factors are age structure as well as the age of the median voter; both of these go against the probability of a reform. A focus on age structure in combination with transitional rules and specific features of the reform may provide an explanation.
    Keywords: political economy; pension reform; median voter; age structure
    JEL: D72 H55 J26
    Date: 2005–06–07
  2. By: Juan Antonio Lacomba (Department of Economic Theory and Economic History, University of Granada); Francisco Miguel Lagos (Department of Economic Theory and Economic History, University of Granada)
    Abstract: This paper analyzes the effects of population aging on the preferred legal retirement age. What is revealed is the crucial role that the indirect ’macro’ effects resulting from a change in the legal retirement age play in the optimal decision. Two Social Security systems are studied. Under a defined contribution scheme aging lowers the preferred legal retirement age. However, under a defined pension scheme the retirement age is delayed. This result shows the relevance of correctly choosing the parameter affected by the dependency ratio in the design of the Social Security programme.
    Keywords: Social security, aging, legal retirement age
    JEL: H55 J26
    Date: 2005–06–16

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