On the impact of indexation and demographic ageing on inequality among pensioners

Dekkers, Gijs (2010): On the impact of indexation and demographic ageing on inequality among pensioners.

Abstract

Possible future trends in the development of pension adequacy are usually simulated using dynamic microsimulation models. These models are very complex and include many different processes. This, and the many individual interactions, makes it difficult to see which procedures and relations underlie the observed simulation results. Hence, the discussion of simulation results, and especially trends, tend to be based on ‘common sense reasoning’ using only a few fundamental parameters. If this strategy to explain the simulation results from a dynamic MSM is valid, then a simple stylized model describing these fundamental relations should be able to capture the long-term trends in inequality among pensioners. The results of the stylized model could then be comparable to those of a dynamic microsimulaton model. This strategy also allows to validate dynamic microsimulation models. This paper uses such a simple model to show some general relations between indexation, retirement age, demographic ageing and the inequality of pensions. The results of this stylized model are then compared to simulation results of a dynamic MSM, in this case MIDAS Belgium.

• Item Type: MPRA Paper
• Language: English
• Keywords: microsimulation, ageing, social hypotheses, poverty, inequality
• Subjects: D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions; J - Labor and Demographic Economics > J1 - Demographic Economics > J14 - Economics of the Elderly ; Economics of the Handicapped ; Non-Labor Market Discrimination; I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty > I32 - Measurement and Analysis of Poverty

References

Dekkers, Gijs, Hermann Buslei, Maria Cozzolino, Raphaël Desmet, Johannes Geyer, Dirk Hofmann, Michele Raitano, Viktor Steiner, Paola Tanda, Simone Tedeschi, Frédéric Verschueren, 2009, What are the consequences of the European AWG-projections on the adequacy of pensions? An application of the dynamic micro simulation model MIDAS for Belgium, Germany and Italy, ENEPRI Research Report No 65, AIM WP4. http://shop.ceps.eu/BookDetail.php?item_id=1780

Gijs Dekkers, Hermann Buslei, Maria Cozzolino, Raphael Desmet, Johannes Geyer, Dirk Hofmann, Michele Raitano, Viktor Steiner, Paola Tanda, Simone Tedeschi, Frédéric Verschueren, 2010, The flip side of the coin: the consequences of the European budgetary projections on the adequacy of social security pensions. European Journal of Social Security, 12(2), June 2010, pp. 94-120.

European Commission (EC), 2007, Pension Schemes and Pension Models in the EU25 Member States, European Economy Occasional Papers, n. 35/2007.

Fasquelle, Nicole, Marie-Jeanne Festjens, and Bertrand Scholtus, 2008, Welvaartsbinding van de sociale zekerheidsuitkeringen: een overzicht van de recente ontwikkelingen, Working paper 8-08, Federal Planning Bureau, Brussels.

FPS Economy, S.M.E.‟s, Self-Employed and Energy, 2009, Demografische indicatoren - Bevolkingsvooruitzichten 2007-2060. http://economie.fgov.be/nl/binarie/CoefBelg_nl%5B1%5D_tcm325-34234.xls

Harding, Ann (1993), Lifetime Income Distribution and Redistribution: applications of a micro simulation model, Contributions to Economic Analysis, vol. 221, Amsterdam: North Holland.

Morrison, Rick, 2007, DYNACAN Validation, Unpublished Working Paper, the DYNACAN team.