Munich Personal RePEc Archive

The Demographic and Educational Transitions and the Sustainability of the Spanish Public Pension System

Díaz-Giménez, Javier and Díaz-Saavedra, Julián (2006): The Demographic and Educational Transitions and the Sustainability of the Spanish Public Pension System. Published in: Moneda y Crédito , Vol. 222, No. 222 (2006): pp. 223-270.

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Abstract

We use a calibrated overlapping generations model economy to quantify the consequences of the demographic and the educational transitions for the viability of the Spanish public pension system. The households in our model economy differ in their education and in the random market value of their time, they understand the link between payroll taxes and public pensions, and they choose when to retire from the labor force. We find that the demographic transition makes the public pension system in our model economy unsustainable. The pension system starts running a deficit in the year 2016, the pension fund is depleted in the year 2029, and the accumulated pension deficits reach a shocking 277 percent of the model economy output by the year 2060.

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