Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/203152
Authors: 
Friese, Max
Year of Publication: 
2019
Series/Report no.: 
Thünen-Series of Applied Economic Theory - Working Paper No. 148 (2nd revised version)
Abstract: 
This paper investigates how demographic change affects the financial sustainability of a pay-as-you-go social security system in an environment with collective bargaining on the labor market. Partial equilibrium analysis shows that the contribution rate or the benefit level decreases, if the old-age dependency ratio rises. The government balances the social security budget by aiming indirectly at a higher level of employment. In general equilibrium the opposite applies. The government increases the contribution rate (defined benefit) or the benefit level (defined contribution) due to additional effects of demographic change on capital accumulation and labor demand. In contrast to a perfect labor market scenario, the imposed financing burden from an aging society is overcompensated by favorable labor market effects on the social security budget.
Subjects: 
demographic change
PAYG pension
social security
trade union
collective wage bargaining
unemployment
JEL: 
H55
J11
J51
Document Type: 
Working Paper

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