Macroeconomic Effects of Public Pension Reforms
IMF Working Papers, December 1, 2010
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Bibliographic details
- Authors: Joana Pereira, Philippe D Karam, Dirk V Muir, Anita Tuladhar
- Published: December 1, 2010
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455211784.001
Summary of study and methodology
- Paper examines three public pension reforms: an increase in retirement age, a reduction in benefits, and an increase in contribution rates.
- Model used: a five-region version of the IMF‘s Global Integrated Monetary and Fiscal model (GIMF).
- Authors: Joana Pereira, Philippe D Karam, Dirk V Muir, Anita Tuladhar.
- Date: December 1, 2010.
- Publication: IMF Working Papers, Working Paper No. 2010/297, Pages: 63, Volume: 2010, Issue: 297, DOI: https://doi.org/10.5089/9781455211784.001, ISBN: 9781455211784, ISSN: 1018-5941.
Key findings
- Public pension reforms can have a positive effect on growth both in the short run and in the long run.
- Short-run growth effects are propelled by rising consumption.
- Long-run growth effects arise from lower government debt crowding in higher investment.
- Cooperative reform across all regions produces larger output effects, reflecting stronger capital accumulation due to higher world savings.
- The increase in the retirement age yields the strongest impact:
- Short run: strongest due to the demand effects of higher labor income.
- Long run: strongest because of supply effects.
Subjects and keywords (as stated)
- Subject: Consumption, Expenditure, Financial services, Labor, Pension reform, Pension spending, Pensions, Public debt, Real interest rates.
- Keywords: Aging, Asia and Pacific, consumption behavior, consumption rise, contribution rate, demand decline, Fiscal Adjustment, GDP, GDP share, Global, hike scenario, increase consumption, OLG models, Pension reform, Pension Reforms, Pension spending, Pensions, real GDP, real GDP in the United States, real GDP rise, real interest rate, Real interest rates, replacement rate, sensitivity analysis, world real interest rate, WP.
Implications and policy-relevant points
- Reforms that raise retirement age can deliver both demand-side short-run gains (via higher labor income and consumption) and supply-side long-run gains.
- Reductions in benefits and increases in contribution rates also support lower public debt and higher long-run investment, contributing to growth.
- Multiregional cooperation amplifies global output effects through enhanced capital accumulation and higher world savings.
Source: "Macroeconomic Effects of Public Pension Reforms", Joana Pereira, Philippe D Karam, Dirk V Muir, Anita Tuladhar, IMF Working Papers 2010, 297 (2010), December 1, 2010.