Altruism, Lifetime Uncertainty and Optimal Public Pension Contribution Rate

AbstractAs a result of the two severe stock market declines since 2000, there has been a steady debate about the affordability of state and local public pension benefits. We measured the affordability of pension benefits in terms of governments’ ability to make the required contributions based on existing tax and revenue bases. We conducted a historical analysis of government pension contributions at national and state level over a 20-year period 1992–2011 and found that the real pension burdens have increased over this period. We also found substantial variation in pension burdens among the 50 states. The results of our empirical analysis showed that employee contribution share, investment return, size of the public workforce, and pension benefit level had significant effects on pension burdens. Based on these findings, we proposed several strategies for reducing pension burdens, including increasing employee pension contribution, reducing size of workforce, and improving pension investment performance.

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Konjunkturabhängigkeit der Gesetzlichen Rentenversicherung am Beispiel der aktuellen Finanz- und Wirtschaftskrise

Zeitschrift für Wirtschaftspolitik ◽

10.1515/zfwp-2010-0307 ◽

2010 ◽

Vol 59 (3) ◽

Cited By ~ 2

Author(s):

Axel Börsch-Supan ◽

Martin Gasche ◽

Christina Benita Wilke

Keyword(s):

Economic Crisis ◽

Pension System ◽

Labour Force ◽

Public Pension ◽

Pension Benefit ◽

Contribution Rate ◽

Public Pension System ◽

Detailed Simulation ◽

The Government ◽

System 1

AbstractThe financial and economic crisis has drawn attention again on the question how sensitive the German public pension system (Gesetzliche Rentenversicherung) reacts to cyclical shocks. We identify three important channels through which business cycle movements may affect the pension system: (1) An effect caused by changes in the wage sum of the insured labour force (Beitragsgrundlageneffekt), (2) an effect caused by changes in the size of the government subsidy (Bundeszuschusseffekt) and (3) an effect caused by changes in the size of the annual pension adjustments (Rentenanpassungseffekt). We quantify these effects for the current financial and economic crisis using a detailed simulation model of the German pension system (MEA-PENSIM). Our simulation results show that the public pension system is able to cope with cyclical shocks in the sense that there are no longrun effects on the pension benefit level or the contribution rate. This cyclical stability is inherent in the system’s pension adjustment formular that links the size of benefits to the development of wages. However, it can be shown that cyclical shocks lead to increases in the contribution rate in the short and medium run. The new law that was passed in spring 2009, which forbids a decrease in nominal pension adjustments in case of decreasing wages (Rentengarantie), extends and intensifies these negative short and medium run effects because it partially offsets the automatic stability mechanism via the wage orientated pension adjustment formula.

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Difference between public pension contribution revenue and pension expenditure, percentage of GDP, 2007 and 2060

OECD Pensions Outlook 2012 - OECD Pensions Outlook ◽

10.1787/9789264169401-graph6-en ◽

2012 ◽

Keyword(s):

Public Pension ◽

Pension Contribution

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Lifetime Uncertainty and the Optimal Replacement Rate of Urban Public Pension in China

2008 International Workshop on Modelling, Simulation and Optimization ◽

10.1109/wmso.2008.99 ◽

2008 ◽

Author(s):

Zaigui Yang

Keyword(s):

Public Pension ◽

Replacement Rate ◽

Optimal Replacement ◽

Lifetime Uncertainty

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PAY-AS-YOU-GO PENSIONS AND ENDOGENOUS RETIREMENT

Macroeconomic Dynamics ◽

10.1017/s1365100518001013 ◽

2019 ◽

Vol 24 (7) ◽

pp. 1700-1719

Author(s):

Pan Liu ◽

Joachim Thøgersen

Keyword(s):

Steady State ◽

Pension System ◽

Capital Intensity ◽

Elasticity Of Substitution ◽

Contribution Rate ◽

Capital Labor Ratio ◽

State Welfare ◽

Private Savings ◽

Pension Contribution ◽

Endogenous Retirement

This paper revisits two classic results in standard overlapping generations models with a pay-as-you-go (PAYG) pension system. Firstly, a PAYG system crowds out private savings and reduces the overall capital stock. Secondly, in dynamically efficient economies, a PAYG system will reduce steady-state welfare. These classic results have been derived and exposed in models with no retirement decision. However, by allowing for endogenous retirement, and without taking recourse to any frictions, uncertainty, or myopia, it is shown that a PAYG system may be neutral and may even increase the capital–labor ratio. In particular, it is shown that the effect of the pension contribution rate on capital intensity depends on the elasticity of substitution between consumption and leisure. If the elasticity of substitution is between 0 and 1, an increase in the contribution rate will increase capital intensity. Moreover, it is shown that the result regarding welfare may also be overturned. An increase in the PAYG contribution rate may increase steady-state welfare.

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Zu den rentenpolitischen Plänen im Koalitionsvertrag 2018 von CDU, CSU und SPD: Konsequenzen, Finanzierungsoptionen und Reformbedarf

Zeitschrift für Wirtschaftspolitik ◽

10.1515/zfwp-2018-0016 ◽

2018 ◽

Vol 67 (3) ◽

pp. 247-265 ◽

Cited By ~ 2

Author(s):

Oliver Holtemöller ◽

Christoph Schult ◽

Götz Zeddies

Keyword(s):

Federal Government ◽

Public Pension ◽

Pension Policy ◽

Contribution Rate ◽

Pension Insurance ◽

Pension Systems ◽

Demographic Dynamics ◽

Percentage Points ◽

Long Run ◽

Policy Measures

Abstract In the coalition agreement from February 7, 2018, the new German federal government drafts its public pension policy, which has to be evaluated against the background of demographic dynamics in Germany. In this paper, the consequences of public pensions related policy measures for the German public pension insurance are illustrated using a simulation model. In the long run, the intended extensions of benefits would lead to an increase in the contribution rate to the German public pension insurance of about two and a half percentage points. Referring to pension systems of other countries, we discuss measures in order to limit this increase in the contribution rate.

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