A Tradeoff between the Output and Current Account Effects of Pension Reform
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Summary:
We compare the long-term output and current account effects of pension reforms that increase the retirement age with those of reforms that cut pension benefits, conditional on reforms achieving similar fiscal targets. We show the presence of a policy trade-off. Pension reforms that increase the retirement age have a large positive effect on output, but a small (and often negative) effect on the current account. In contrast, reforms that cut pension benefits improve the current account balance but reduce output. Mixed pension reforms, which extend the working life and cut pension benefits, can simultaneously boost output and the current account.
Series:
Working Paper No. 2012/283
Subject:
Aging Balance of payments Current account Expenditure Labor Pension reform Pension spending Pensions Population and demographics
English
Publication Date:
December 3, 2012
ISBN/ISSN:
9781475563948/1018-5941
Stock No:
WPIEA2012283
Pages:
24
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