Macroeconomic Effects of Public Pension Reforms

Author/Editor:

Anita Tuladhar ; Dirk V Muir ; Joana Pereira ; Philippe D Karam

Publication Date:

December 1, 2010

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The paper explores the macroeconomic effects of three public pension reforms, namely an increase in retirement age, a reduction in benefits and an increase in contribution rates. Using a five-region version of the IMF‘s Global Integrated Monetary and Fiscal model (GIMF), we find that public pension reforms can have a positive effect on growth in both the short run, propelled by rising consumption, and in the long run, due to lower government debt crowding in higher investment. We also find that a reform action undertaken cooperatively by all regions results in larger output effects, reflecting stronger capital accumulation due to higher world savings. An increase in the retirement age reform yields the strongest impact in the short run, due to the demand effects of higher labor income and in the long run because of supply effects.

Series:

Working Paper No. 10/297

Subject:

English

Publication Date:

December 1, 2010

ISBN/ISSN:

9781455211784/1018-5941

Stock No:

WPIEA2010297

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

63

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